South Korea Orders Truckers Back to Work as Labor Tensions Rise Globally

Date: Friday, December 9, 2022
Source: Wall Street Journal

SEOUL—South Korea has ordered more striking truck drivers to return to work, in an effort to limit damage to the economy and supply chains as governments around the world grapple with a rise in labor unrest driven by inflation.

On Thursday, South Korean President Yoon Suk-yeol widened the scope of a back-to-work order to include the steel and petrochemical industries, after issuing a similar order for the cement sector last week.

South Korea is just one of many countries where workers are demanding better pay and working conditions as the costs of goods and services rise. Labor tensions have led to strikes across the energy, steel and auto industries in France, Germany, Spain and Austria. In recent weeks, the U.K. has seen walkouts in the transport and health sectors. In the U.S., President Biden signed legislation last week to prevent a strike by railway workers over wages and paid time off.

Labor economists say that inflation has prompted workers worldwide to demand higher wages to compensate for the increase in food and energy costs. In the U.S. alone, the number of strikes that have taken place this year is up roughly 34% compared with the previous year, said Johnnie Kallas, director of the Labor Action Tracker project at Cornell University’s School of Industrial and Labor Relations.

In places like the U.S. and Europe, high inflation has combined with a tight labor market to give workers greater impetus to voice their demands, said Christian Dustmann, a labor economist and professor at University College London. “Under current conditions, it’s not surprising that we are seeing a lot of strike activities around the world,” he said.

The rise in labor unrest is coming as central banks are battling to bring inflation down and supply chains are just starting to stabilize after pandemic disruptions. In some cases, that has prompted state authorities to step in with bold interventions to prevent or minimize the impact to industries deemed critical to the economy and public interest.

That includes South Korea, where the government has intervened with back-to-work orders for truck drivers in industries including cement, petrochemicals and steel. It is the first time that such orders have been used since the government began allowing for them in cases when the national economy is at risk under a revision to the Trucking Transport Business Act in 2004.

Those who refuse to return to work without justifiable reason could see their trucking licenses revoked and face punishments of up to three years in jail or fines of up to 30 million won, equivalent to $22,800.

The moves in South Korea echo those of the U.S., where the government recently took the rare step of passing legislation to make major freight railroads and workers accept an agreement to prevent harm to the national economy. President Biden and Republican and Democratic lawmakers said they didn’t like getting in the middle of the dispute but that the country couldn’t risk a strike given the importance of transportation networks to supply chains.

South Korea’s government said Thursday that its back-to-work orders were justified by economic concerns. The country is facing challenges including weak exports, inflation and high interest rates. “The economy is in a crisis. There is no time or room for energy spent on unnecessary conflicts,” said Minister of Economy and Finance Choo Kyung-ho.

The truckers’ union has criticized the Yoon administration, calling its measures, including the back-to-work order, a “violent repression” of labor rights.

In November, South Korea saw exports drop more than expected by 14% compared with the prior year, as tech exports contracted sharply, according to a Barclays report earlier this month. South Korea’s exports are expected to see further contractions due to the impact from the truckers strike, the continued slowdown of the global economy and weak semiconductor exports, declining by 10% to 20% compared with the previous year in the next two to three quarters, according to Barclays.

Strikes like the current one can be damaging not just for South Korea’s economy but also the global supply chain, as the country is a major exporter of everything from semiconductors to automobiles to shipping, said Gareth Leather, a senior economist in the emerging Asia team at Capital Economics. He added that the knock-on impacts on supply chains would be mitigated compared to when the truckers union staged a strike in June, because demand for tech exports has since weakened.

Shipment delays over the course of 12 days of the truckers strike have resulted in losses of around 3.5 trillion won, equivalent to $2.6 billion, across industries spanning steel, petrochemicals, oil refining, cement and autos, South Korea’s Ministry of Trade, Industry and Energy said Tuesday.

Thousands of unionized truck drivers in South Korea have been on strike for more than two weeks over wage-related demands. The truckers union is seeking to expand and make permanent a policy that guarantees minimum freight rates. The policy, which is set to expire at the year’s end, includes provisions to determine pay that factors in fluctuating costs such as fuel prices.

Negotiations have stalled as the truckers union has rejected the government’s proposal to extend the policy for three years. Critics of the policy have argued that the measures place an unfair cost burden on logistics companies that employ the truck drivers.

South Korea’s government said the back-to-work order placed on the cement industry last week has already helped ease the logistics disruptions. As of Wednesday, cement deliveries that were once at 11% of normal levels have fully recovered, while inbound and outbound container traffic at the country’s 12 major ports that had once fallen to 43% of normal levels had recovered, it said.

The South Korean government is unlikely to accept the union’s demands to establish a permanent minimum-freight rate policy beyond the proposed three-year period, given the current administration’s leanings toward pro-market principles, said Kim Dae-il, a professor of labor economics at Seoul National University.

“The current government wants to keep a balance between the companies and labor unions,” he said.

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