Yang Gyeong-soo, chairman of the Korean Confederation of Trade Unions (KCTU), and KCTU members held a New Year's press conference near the Blue House fountain in Seoul on the 7th, ahead of the implementation of the "Yellow Envelope Act," demanding that "real employers must be responsible" and calling for the abolition of the enforcement decree amendment prepared by the Ministry of Employment and Labor. [Photo=Yonhap News]

The revised labor law, the amendment to Article 2 and 3 of the Labor Union and Labor Relations Adjustment Act, also known as the "Yellow Envelope Act," is scheduled to take effect on March 10th, just two months away. This follows six months after it was passed by the National Assembly on September 9th last year and officially proclaimed by the government. 

The origin of the Yellow Envelope Act dates back to the labor dispute at Ssangyong Motor Company in 2009. When the court demanded 4.7 billion won in damages from the Ssangyong Motor strike workers in 2014, citizens raised funds in yellow envelopes, collecting 1.5 billion won. This act of solidarity led to the law being named the "Yellow Envelope Act." 

The original intention of this law was to relieve workers from excessive liability for damages, allowing them to maintain a normal life even after a strike, thus serving as a law to protect workers' rights and interests. 

However, this bill is highly unfavorable to employers and carries significant problems in that it could ultimately lead to the abandonment of corporate management. 

The harmful effects of the Yellow Envelope Act can be broadly categorized into the following three points:

Shifting Negotiation Responsibility Between Prime Contractors and Subcontractors

First, the concept of an employer was originally limited to the business owner or the party to the employment contract on their behalf. However, this bill expands the concept of an employer to include those who can effectively control and determine workers' working conditions, such as controlling shareholders or group chairmen, thereby posing a risk of deterring those who invest capital in corporate management. 

Furthermore, problems arise when there are discrepancies in interests between prime contractors and subcontractors, particularly in industries like construction and shipbuilding, where subcontractors form a significant part of the workforce. 

This is because if subcontracting companies make demands for improvements in working conditions, leading to a conflict of interests between the two parties, the negotiation responsibility for these issues is entirely transferred to the owner or CEO of the prime contractor, presenting a significant problem. 

In the case of shipbuilding, automobile, and construction companies, this law includes dozens or hundreds of subcontracting companies and hundreds or thousands of first and second-tier supplier groups that were previously unrelated to the prime contractor's labor disputes. Consequently, companies in these industries face labor negotiations at any time, 365 days a year, and the negotiation costs expand astronomically. 

Risk of Infringing on Companies' Inherent Management Rights

Second, labor disputes originally referred to disputes arising from discrepancies in interests between workers and employers concerning working conditions such as wages, working hours, welfare, and dismissals. 

However, the Yellow Envelope Act goes further by defining not only discrepancies in working conditions but also discrepancies in business decisions that affect working conditions as labor disputes. As a result, it creates a space for labor unions to interfere with management activities, which are inherently the sole rights of employers, such as overseas investment, expansion, or adjustments to business scale, ultimately allowing unions to put a brake on management rights. 

Reduced Compensation for Illegal Acts Leading to Increased Corporate Losses

Third, in the past, liability for damages resulting from workers' illegal acts during collective bargaining or strikes could be claimed from the labor union or individual workers involved in the strike. 

However, this provision has been amended to disallow claims for damages if they would render the labor union unable to exist. Not only has a separate cap on damages for labor unions been set, considering factors such as the number of union members, union dues, and the union's financial status, but the amount of damages can also be reduced based on the financial situation of individual workers and their contribution to the damage incurred. 

However, in many cases, it is practically impossible to calculate the individual contribution of workers who engaged in collective illegal acts. Furthermore, based on the financial situation of individual workers, compensation could even be waived for damages incurred. 

Ultimately, even if companies suffer massive losses due to illegal strikes, compensation for damages becomes practically difficult. This eliminates the deterrent effect of illegal strikes on workers, forcing employers to preemptively factor in the enormous additional costs of strikes into their management plans. 

Given these critical problems, why is the current government and ruling party pushing this bill forward, overriding the opposition party's objections, under the guise of helping workers?

Instructions and Patronage from the Chinese Communist Party (CCP)

The enactment of the Yellow Envelope Act can be attributed, in short, to the directives and patronage of the Chinese Communist Party (CCP).

China has long been in competition with South Korea's leading companies across all industrial sectors. China has plagiarized and misappropriated our technology to secure competitiveness in basic material industries like petrochemicals and steel in a short period, surpassing South Korea to become the world's top exporting nation. 

Recently, China has been actively exploring entry into fields where South Korea holds a technological advantage, including automobiles, semiconductors, shipbuilding, and nuclear power generation. 

In other words, it is evident that if South Korea's industrial base collapses, Chinese companies will reap the direct benefits. 

The issue is not limited to the export market; the domestic market is also a concern. Currently, Chinese nationals entering the country in large numbers through visa-free entry, including undocumented immigrants, will likely lead to companies professionally employing Chinese labor in the future through laws such as the prohibition of discrimination against Chinese workers. In such a scenario, there is a high probability that Chinese companies will enter South Korea in large numbers to fill the void left by South Korean companies that withdraw or go bankrupt.

Both Exports and Domestic Consumption Will Be Left as Empty Shells

Ultimately, South Korea's exports and domestic consumption will be left as mere shells, and the economy is likely to decline rapidly. Although on the surface it is a revised labor law intended to double workers' rights, the hidden agenda is to facilitate the recovery of Chinese companies that have seen their export competitiveness decline due to the impact of the trade war with the United States, by causing the downfall of South Korean companies. 

The current administration and legislature have shown a stance in all economic policies that is not just friendly towards China but so extreme in its pro-China, anti-nationalist actions that it is akin to giving away their own flesh. In return, they can secure benefits from the CCP through △ political power maintenance via fraudulent elections, and △ economic benefits through exclusive contracts for supplying parts or importing in cases like solar or wind power, involving family-affiliated companies.

In other words, it is not an exaggeration to say that they are seeking a nationalistic "economic recession tsunami" that will lead to the collapse of South Korean businesses and labor unions, for the purpose of maximizing the personal profits of a few politicians or administrators. 

It is on this point that unions such as the Korean Confederation of Trade Unions (KCTU) and their members must awaken. While catching the golden goose may yield temporary benefits by obtaining golden eggs, the future will be completely lost. Similarly, although it may seem like workers' rights are being improved in the short term, eventually, the workplaces of workers will disappear. 

As a natural progression, companies with financial resources will accelerate their exodus by relocating their production bases overseas due to the indiscriminate enforcement of laws like the Yellow Envelope Act, which cause cost surges. Furthermore, companies with insufficient financial resources may even opt to file for bankruptcy before being overwhelmed by debt. 

Meanwhile, laid-off workers may try to place their hopes on Chinese companies that are flooding in to replace South Korean businesses. However, as seen in the Belt and Road Initiative (BRI) projects in Eastern Europe, the Chinese Communist Party has no reason to hire South Korean workers, who enjoy superior wages and welfare conditions compared to China. Moreover, even if South Koreans are mandated to be hired, it is expected that once Chinese companies establish themselves in South Korea, laws like the Yellow Envelope Act, which burden companies, will be easily discarded. 

Labor Exodus from Eastern Europe and South Korea's Economic Decline 

The Chinese Communist Party, through its Belt and Road Initiative projects in Eastern Europe, invested capital in building key industries in partner countries. However, contrary to prior agreements, these industries were staffed entirely by labor dispatched from China, particularly by urban migrant workers from rural areas who had lower wage burdens and were easier to control. 

Among Eastern European countries, the Czech Republic, Hungary, and Poland have Gross Domestic Products (GDP) close to half of South Korea's and have excellent educational outcomes. Therefore, if locals were to be hired for the construction and operation of China's key industries, labor costs would inevitably be high. 

Consequently, China boldly abandoned its prior commitment to hire local workers at the time of investment and replaced them with cheaper migrant workers from mainland China who were less likely to raise complaints. As a result, unemployment among locals in Eastern Europe surged. For countries that are members of the European Union (EU), this led to a massive exodus of labor seeking employment in countries like Germany, the Netherlands, Italy, and France. 

What about South Korea? Unlike Europe, due to cultural and linguistic barriers, the outflow of labor to countries like China and Japan is expected to be very limited. Instead, the emigration of a small number of highly skilled workers to developed countries is likely to be unavoidable. 

Harmful laws like the Yellow Envelope Act, which aim to cripple businesses, can act as a catalyst for bringing in Chinese companies by pushing our businesses and workers to the brink of disaster simultaneously. Therefore, South Korea may face a vicious cycle of production cliffs, employment cliffs, and consumption cliffs. As a result, our GDP could plummet rapidly within a few years. All of this is the work of the current rulers who are engaged in pro-China, anti-nationalist actions. This cannot continue as it is.

◆ Professor Kim Byung-jun

Former Professor at Kangnam University, Co-representative of the Professors' Association for the Practice of Freedom and Justice. He is actively engaged in writing columns for media outlets and hosting regular academic seminars on topics such as criticism of the judiciary, challenges in responding to economic invasion by Chinese capital, and uncovering election fraud.