Why do some countries enact painful labor market reforms that lead to an increase in inequality and dualism while others do not? Why do some countries offer compensation for the losers of labor market reforms, but not others? Finding answers to these questions is of perennial interest to students of labor market politics, and Jiyeoun Song’s analysis of reform measures in Japan and Korea fills an important gap in the predominantly Eurocentric literature.
Due to the Asian financial crisis, Japan and Korea faced similar economic pressures in the late 1990s and early 2000s, but implemented different types of labor market changes. Japan introduced selective reform measures for non-regular workers, but preserved employment protections for insiders. Korea, on the other hand, introduced comprehensive labor market changes for all workers, and particularly targeted regular workers at the large chaebols. Although both countries chose different reform strategies, they experienced similar outcomes: In both cases, the reforms deepened labor market inequality and dualism, albeit to varying degrees.
For Jiyeoun Song, the key explanatory variables are levels of employment protection coverage and the extent to which industrial relations are centralized. Where employment protection covers a large part of the workforce (as in Japan), liberalization measures are more likely to target labor market outsiders, while privileged insiders continue to enjoy employment protection. This is the preferred adjustment route for policymakers in Japan, who seek to minimize adjustment pain for well-organized insiders. By contrast, where the less-institutionalized practices of employment protection cover a small segment of the workforce (as in Korea), reform is more likely to include the entire workforce, including the small segment of workers who enjoy job security and other social benefits. In this case, employers take advantage of the small share of the workforce enjoying social protection, in the hope of rapid economic turnaround.
There are several key strengths to this book. First, the topic itself as well as the cases—Japan and Korea—are understudied. Second, the theory part offers a broad discussion of existing theoretical frameworks (including varieties of capitalism, origins of dualism and inequality, partisanship of the government, and labor market institutions), probing which approaches are applicable to Japan and Korea, and which ones are not. This means the book will appeal not just to country specialists, but to all students of labor market politics. The empirical sections of the book are based on 15 months of field work and provide well-researched case studies, with a thorough discussion of the origins of labor market institutions and reform outcomes. Third, Song identifies a parsimonious causal mechanism (the design of reform is driven by pre-existing labor market institutions) that is analytically powerful and generates valuable insights into the dynamics that are reshaping labor markets in Japan and Korea.
But her parsimonious theory also leaves the reader hungry for more. In particular, I would have liked to learn more about the role of political agency in reform. Political agency takes a back seat in Song’s analysis, while institutional legacies of employment protection and industrial relations are considered central in explaining different labor market processes and outcomes. Despite fascinating descriptions of divergent preferences of businesses, labor union and political representatives in chapters four and five, there is no theoretical discussion of feedback effects between citizens, labor and business groups, and policymakers. By according priority to structure over action, the theory has a deterministic flavor. We learn that “neither the Korean business community nor organized labor had an institutional channel through which to access the political process. Their only available policy resources to affect labor policy making were the less institutionalized channels of lobbying and street demonstrations” (p. 135). But these “less institutionalized” or informal processes could have been part of her theory. An interesting part of informal interactions between citizens and policymakers are clientelist practices. Song dismisses political partisanship arguments that explain cross-national variations in the politics of labor market reform with the vote share of left-wing versus right-wing parties because such arguments only apply in programmatic party systems. Japan and Korea, however, are characterized by clientelistic exchanges, not programmatic linkages. Fair enough. However, Song could have explicated the ways in which clientelism affects the tradeoff between labor market liberalization and compensation of reform losers. For example, Herbert Kitschelt in “Social Policy, Democratic Linkages, and Political Governance,” (Paper prepared for the conference on The Quality of Governance and the Performance of Democracies, Gothenburg, May 20–22, 2015, University of Gothenburg) indicates that the pressure to expand social policy is weaker where clientelist strategies are more prominent. Others have shown that clientelist exchanges are not always asymmetric relationships between patron and clients, but a mechanism for the poor to extract valuable benefits from the political system (Michelle Taylor-Robinson (2010) Do the Poor Count? Democratic Institutions and Accountability in a Context of Poverty). Unfortunately, we learn nothing about the ways in which clientelism affected labor market policies in Japan and Korea.
The case studies are well-researched and written, but I was left wondering whether Song’s interpretation of the reforms is the only acceptable one. The book portrays the labor market reforms in the two countries as dissimilar—Japan introduced gradual policy change that exempted regular workers from the pain of adjustment, while Korea enacted more far-reaching, comprehensive reforms. The section on Japan convinced me that there is a close fit between theory and empirics. Regarding Korea, I do not doubt Song’s wealth of evidence; however, I am unsure why the policy changes constitute comprehensive reform, and cannot be interpreted as selective (as in Japan). Song argues that the institutional features of the employment protection system contributed to Korea’s comprehensive reform: “[G]iven the small proportion of the workforce covered by employment protection… policymakers calculated that… comprehensive reform for all workers would be far more effective” (p. 147). But perhaps one could argue that the reform outcome was less a result of pre-existing institutional arrangements, but a consequence of the severity of the Asian financial crisis. With eight of sixteen chaebols bankrupt in 1998 and the country at the brink of economic collapse, the regular workforce had shrunk to about 10 percent. Thus, labor held few trump cards. Yet, even in this dire situation, regular workers faced more gradual policy changes than outsiders. Although many workers were laid off in the immediate aftermath of the crisis, the large enterprises resumed their practice of protecting core workers once the crisis was over. Song herself concedes that it was difficult to implement the reform, as many chaebols did not abide by it (p. 148). Insiders were largely shielded (p. 151), and the reforms did not greatly affect chaebol workers because of the power of chaebol unions at the firm level (p. 157). This suggests that, even as the reservoir of regular workers shrank, this small segment of the workforce was capable of maintaining its privileged position. I am therefore doubtful of the claim that chaebol workers were a primary target of the labor reforms. But according to the book, it is the assault on the protections of chaebol workers that makes the reform comprehensive, as opposed to selective.
Related to this point is the argument about labor being weak. Power resource explanations are rejected because labor in Japan and Korea is considered powerless. Yet, it is unclear what starting point is used to make this assertion. If union organization rates and levels of union fragmentation are used, Song is correct in labeling labor as weak. But the existence of a medium-high level of employment protection for regular workers—a level much higher than that of the United Kingdom or United States—suggests that labor was in a comparatively strong position. Regular workers in Korea enjoyed relatively high levels of job security, high wages, and generous welfare benefits. Chaebol unions were known for their militant behavior and persistent demands for wage increases. Threats to engage in disruptive labor strikes were credible, prompting chaebol employers to make frequent concessions to unions in wage bargaining. Korean employers faced difficult consultations with labor union and worker representatives before labor reforms could be implemented, and Japanese employers were forced to provide high severance pay and unfair dismissal compensation for regular workers with long company tenure. All this suggests that workers had some clout in labor disputes. The lack of clear criteria for measuring labor strength or weakness is problematic because it implies that the theoretical predictions about selectivity or comprehensiveness of reform are derived from a somewhat arbitrary reference point.
A few theoretical shortcomings notwithstanding, the book presents rich and valuable case narratives, which will be useful for anyone who wants to understand the politics of employment protection, industrial relations, and labor market policy beyond Western Europe. Song must be commended for analyzing to what extent theories of European and Anglo-Saxon labor market reforms can be applied to policy changes enacted in Japan and Korea, and for shedding new light on the forces that are restructuring labor markets in these countries. The book is well-written and stands to make an important contribution in the fields of comparative labor politics and comparative social policy.
