The Economic Success of South Korea Essay Example | Topics and Well Written Essays - 1500 words

The Economic Success of South Korea - Essay Example On the contrary, Korea surprisingly experienced a continuous rise in average real wages since the sixties. This appears to defy the law of supply and demand for labor, that is, why wages would rise in a regime of abundant labor supply. Amsden (1990) attributes these to the following: First, high wages were in part due to the intense training and education in Korea to meet the demands of a technologically competent workforce. The increase in wages was the reward to individuals in the workplace who undertake additional training to complement the technology transfer. This contrasts with the traditional Asian model of the existence of ‘implicit contracts’ between workers and employers, where workers are rewarded for their loyalty and hard work in the performance of their duties. Second, the wage phenomenon in Korea has drawn attention to the segmentation of the labor market, on the basis of the qualifications required of the workers for the late industrialization. Workers wh o possessed the skill sets needed by a fast industrializing economy comprises a minority, at least at the time the industry is growing fastest, which the firms will seek to attract with higher wages. Finally, the increase in wages is partly justified by Korea’s fast growing GNP. Land reform and small-scale agriculture Amsden (1990) noted that one of the drivers of wages in modern Korean industries is the rapid increase in productivity in the agricultural sector. Prior to the seventies, the implicit wage received by male workers in agriculture surpassed the average wage of workers in manufacturing. There were few proletarians in Korean agriculture; the post-World War II agrarian reform made the tillers the owners of the land... The Korean economy is often looked up to as a model for economic success in Asia, although studies show that there are certain aspects where Korea departed from the Pacific-Asian model, and in other aspects are consistent with it. According to Ha-Joon Chang and Chul-Gyue Yoo (2000), from the 1960s to the mid 1980s, while Japan and Taiwan experienced consistent trade surplus, Korea lagged behind with a trade deficit resulting in foreign exchange shortage. As a result of the Asian crisis, the IMF recommended economic reform which followed the US-UK model. The equities market was opened to foreign investors, forcing the large publicly-listed companies to comply with international investors’ demand for short-term profits by minimizing investments. Korea’s economic growth thus fell from 6%-7% to below 4% per annum on per capita terms. Lower growth meant fewer jobs, lower wages, and poorer protection for the worker due to a relaxation of the labor laws. The welfare state and lifetime employment have been abandoned, causing great apprehension among Koreans about the future and their job security, since employers may more easily separate them from the company and replace them with younger, cheaper employees. Furthermore, Korean youth are opting more to become physicians and lawyers which are seen as more stable professions, rather than study science and technology which embody the skill sets industry needs (Ha-Joon Chang, 2012).