[Editorial] Expanding Bonus Conflicts: A New Threat Awakens in the Economy

Labor unions at major conglomerates are rapidly expanding their demands for performance bonuses. The push to demand N% of operating profit as bonuses is spreading beyond semiconductors to shipbuilding, autos, biotech, telecoms and other industries. HHI recently finalized this year's wage and collective bargaining proposal, which includes a bonus distribution of at least 30% of operating profit.
Just a few years ago, South Korea's shipbuilders went through a grim period as new orders dried up. Only recently have they returned to profit, helped by rising demand for high-value-added vessels driven by environmental regulations. After weathering a long slump, they were finally preparing for a new leap forward. Korean shipbuilders, which have an edge in advanced technologies, are well positioned in the current order market, but they cannot ignore China's fierce pursuit.
The launched MASGA Project, short for "Make American Shipbuilding Great Again," could become a springboard for the revival of South Korea's shipbuilding industry. Profits should ideally be used as investment funds for that effort, yet the union is pressing for a minimum 30% bonus payout. Shipbuilding is a classic cyclical industry with wide swings between boom and bust. If resources needed to prepare for downturns are poured into bonuses, the industry will not be able to build a buffer for the next slump.
Demands to fix bonuses at a set percentage of operating profit are spreading like wildfire. In the IT sector, Kakao Corp.'s union is demanding bonuses equal to about 15% of operating profit and has threatened collective action. Samsung Biologics and LG Uplus Corp. are each seeking bonuses of 20% and 30% of operating profit, respectively.
Hyundai Motor Company's union is demanding bonuses equal to 30% of net profit. Based on last year's net profit in the 10 trillion won range, the requested bonus would amount to more than 3 trillion won. That is larger than Hyundai Motor Company's operating profit of 2.3145 trillion won in the first quarter of this year. Hyundai Motor Company has seen operating profit fall sharply this year amid higher protectionist barriers and pressure from tariffs. Stronger union pressure could become a risk to production, exports and investment.
South Korea's growth outlook has been revised upward thanks to the semiconductor boom, but even that leaves the economy in the low 2% range. In other words, the country remains trapped in a low-growth tunnel compared with major economies. Reducing dependence on semiconductors and spreading the benefits across all industries is the task at hand, yet for various reasons the front lines are failing to gain momentum. Excessive union demands and the government's ambiguous stance also bear much of the blame.
Since the Yellow Envelope Act, or the revised labor law, took effect, industry has already been under strain. Recently, a union at a Hyundai Mobis subsidiary voted to strike in protest against the sale of a business division at headquarters. Corporate management decisions have now become subjects of labor disputes. The subsidiary union is also demanding, together with KMWU, that the parent company Hyundai Mobis come directly to the bargaining table.
Labor unions at major conglomerates are taking advantage of the government's pro-labor mood to make excessive demands. The call to institutionalize a bonus system based on "N% of operating profit," which has no precedent overseas, is part of the same pattern. The government should take a firm line against the Samsung Electronics union, which rejected compromise even in post-mediation talks on the 12th.
The union is continuing to repeat only its demands for institutionalizing a 15% bonus tied to operating profit and abolishing the bonus cap of 50% of annual salary, while rejecting further talks proposed by the National Labor Relations Commission and management. It says it will launch a general strike on the 21st if those demands are not accepted. If advanced production lines come to a halt, the damage would run into tens of trillions of won, and it would deal a fatal blow to the company's future and the nation's future as well. If the strike becomes a reality, the government should invoke emergency arbitration powers.