A Cause for Wage Inequality
The OECD and the Ministry of Employment and Labor of South Korea announced on March 19 that only 10.7 percent of South Korean workers belonged to trade unions in 2017 whereas the ratio was as high as 52 percent in Norway, 65 percent in Finland and 66 percent in Sweden.
During the same period, the ratios of Britain, Germany and Spain were 24 percent, 17 percent and 14 percent, respectively. In addition, South Korea’s collective bargaining coverage was much lower than those of the European countries. Experts point out that the coverage needs to be raised fast in that a low collective bargaining coverage leads to employee wage inequality.
In many cases, a high collective bargaining coverage offsets a low ratio of unionization to ensure better working conditions for those who work for small firms. For instance, France’s collective bargaining coverage amounts to 98 percent although its ratio of unionization stands at 11 percent. South Korea’s collective bargaining coverage is merely 12 percent whereas the OECD average is 32.2 percent.
Such a low coverage of South Korea can be attributed in part to inactive collective bargaining agreement extension. The extension can be defined as a collective agreement being extensively applied to uninvolved workers and places of business when the extensive application is deemed necessary for the public good. A number of European countries are making use of collective agreement extension in keeping wage inequality to a minimum.