Skip to main content
SpringerLink
Log in

Bonuses, unions, and labor productivity in South Korea

  • Articles
  • Published:
Journal of Labor Research Aims and scope Submit manuscript

Abstract

Using a set of time-series (1972–1989) and cross-sectional data on eight two-digit Korean manufacturing industries, we examine the variability of South Korea’s employee bonus system and the effect of the employee bonus on productivity. A test of the variability of the bonus showed that the bonus rate (ratio of the bonus to the wage) was positively influenced by industrial output, so the bonus is not merely a disguised wage. An augmented Cobb-Douglas production function estimation shows that the bonus has a positive and significant productivity effect. Capital-intensive and laborintensive industries did not have significantly different productivity effects due to the bonus. Lastly, Korean unions reduced labor productivity and negatively affected the productivity effect of the bonus. Also, compared with the previous period, the productivity effect of the bonus has become negative since the1987 Great Labor Offensive.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Ahn, Choon-Shik. “Personnel and Labor Relations.” Chapter 5 inForty Years’ History of Labor Economics. Seoul, Korea: Korea Employers’ Federation. (In Korean), 1991.

    Google Scholar 

  • Alchian, Armen A., and Harold Demsetz. “Production, Information Costs, and Economic Organization.”American Economic Review 62 (December 1972): 77–95.

    Google Scholar 

  • Bank of Korea,Financial Statements Analysis. Seoul, Korea, 1987, 1988,1989.

  • Bclman, Dale. “Unions, the Quality of Labor Relations and Firm Performance.” Mimeographed paper. Washington, D.C.: Economic Policy Institute, 1989.

    Google Scholar 

  • Blanchflower, David G., and Richard B. Freeman. “Unionism in the United States and Other Advanced OECD Countries.”Industrial Relations 31 (Winter 1992): 56–79.

    Google Scholar 

  • Blinder, Alan S. “Paying for Productivity: A Look at the Evidence.” Washington, D.C.: Brookings Institution, 1990, pp. 1–13.

    Google Scholar 

  • Bullock, R.J., and Edward Lawler. “Gainsharing: A Few Questions and Fewer Answers.”Human Resource Management 23 (Spring 1984): 23–40.

    Article  Google Scholar 

  • Bureau of Labor Statistics, U.S. Department of Labor. Bulletin No. 89-32. Washington, D.C.: BLS, 1990.

    Google Scholar 

  • Cable, John R., and Felix R. FitzRoy. “Productive Efficiency. Incentives and Employee Participation: Some Preliminary Results for West Germany.”Kyklos 33 (February 1980): 100–21.

    Article  Google Scholar 

  • Cable, John, and Nicholas Wilson. “Profit-Sharing and Productivity: An Analysis of UK Engineering Firms.”Economic Journal 99 (June 1989): 366–75.

    Article  Google Scholar 

  • Cardinal, Laura B., and I. B. Helburn. “Union Versus Nonunion Attitudes Toward Share Arrangements.”Industrial Relations Research Association Proceedings (1986): 167–73.

  • Coates, Edward M. “Profit Sharing Today: Plans and Provisions.”Monthly Labor Review 14 (April 1991): 19–25.

    Google Scholar 

  • Conte, A. Michael, Doug Kruse, and Jan Svejnar. “ESOPs, Profit Sharing and Other Contingent Compen sation Plans: How Do They Affect Company Performance?” Paper presented at the joint IRRA/JCE panel on Performance Effects of Employee Ownership:U.S.-Japanese Comparisons. Allied Social Science Association Meeting. Washington D.C., December 28. 1990.

  • Conte, A. Michael, and Jan Svejnar. “Productivity Effects of Worker Participation in Management, Profit-Sharing, Worker Ownership of Assets and Unionization in U.S. Firms.”International Journal of Industrial Organization 6 (March 1988): 139–51.

    Article  Google Scholar 

  • Economic Planning Board, Republic of Korea.Annual Report on Current Industrial Production Survey, Seoul, Korea, 1973–1990. (In Korean).

  • Estrin, Saul, Paul Grout, and Sushil Wadhwani. “Profit Sharing and Employee Share Ownership.”Economic Policy 2 (April 1987): 13–62.

    Article  Google Scholar 

  • FitzRoy, Felix, and Kornelius Kraft. “Cooperation, Productivity, and Profit Sharing.”Quarterly Journal of Economics 102 (February 1987): 23–35.

    Article  Google Scholar 

  • Florkowski, Gary W. “Profit Sharing and Public Policy: Insights for the United States.”Industrial Relations 30 (Winter 1991): 96–115.

    Article  Google Scholar 

  • _____. and Michael H. Schuster. “Support for Profit Sharing and Organizational Commitment: A Path Analysis.”Human Relations 45 (1992): 507–23.

    Article  Google Scholar 

  • Freeman, Richard B. “De-Unionization of the United States: Good, Bad, or Irrelevant?” Memeographed paper. Washington, D.C.: Economic Policy Institute. 1990.

    Google Scholar 

  • _____. “Bouses and Employment in Japan.”Journal of the Japanese and International Economies 1 (June 1987): 168–94.

    Article  Google Scholar 

  • General Accounting Office. “Productivity Sharing Programs: Can They Contribute to Productivity Improvement?” Washington, D.C.: Government Printing Office, March 31, 1981.

    Google Scholar 

  • Greene, William H.LIMDEP 6.0. New York: Econometric Software, 1991.

    Google Scholar 

  • Hankook Ilbo Daily, June 23, 1992.

  • Hankyorae Shinmoon Daily, December 9, 1991.

  • Hsiao, C.Analysis of Panel Data. Cambridge: Cambridge University Press, 1986.

    Google Scholar 

  • Hewitt Associates.Salaried Employee Benefits Provided by Major U.S. Employers: A Comparison Study, 1979 through 1984. Atlanta: Hewitt Associates, 1985.

    Google Scholar 

  • Hirsch, Barry T.Labor Unions and the Economic Performance of Firms. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 1991.

    Google Scholar 

  • Ito, Takatoshi, and Kyoungsik Kang. “Bonuses, Overtime, and Employment: Korea vs. Japan.”Journal of the Japanese and International Economies 3 (1989): 424–50.

    Article  Google Scholar 

  • Jensen, Michael C., and William H. Meckling. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.”Journal of Financial Economics 3 (October 1976): 305–60.

    Article  Google Scholar 

  • _____. “Rights and Production Functions: An Application to Labor-Managed Firms and Codetermination.”Journal of Business 52 (October 1979): 469–506.

    Article  Google Scholar 

  • Jones, Derek C., and Jan Svejnar. “Participation, Profit Sharing, Worker Ownership, and Efficiency in Italian Producer Cooperatives.”Economica 52 (November 1985): 449–65.

    Article  Google Scholar 

  • Kaufman, Roger. “The Effects of Improshare on Productivity.”Industrial and Labor Relations Review 45 (January 1992): 311–22.

    Article  Google Scholar 

  • Kim, Joon W. “Bonuses and Employment in Korea.” Senior Thesis, Department of Economics, Harvard University, March 23, 1988.

  • Kim, Young Vae. “Industrial Relations and Flexible Wages in Korea.” Unpublished paper. Seoul, Korea: Labor Economics Research Institute, Korea Employers’ Federation, 1991.

    Google Scholar 

  • Korea Chamber of Commerce and Industry.Model Wage Survey, Ouoted from Korea Labor Institute,KLI Labor Statistics (1990): 74.

  • Korea Labor Institute.Korea’s Labor Unions (I), Seoul, Korea. (In Korean), 1989.

  • _____.KLI Labor Statistics, Seoul, Korea. (In Korean), 1990 (a).

  • _____.Quarterly Labor Review, Seoul, Korea. (In Korean), 1990 (b).

  • _____.Quarterly Labor Review, 4–3, Seoul, Korea. (In Korean, 1991): 164–65.

  • Korea Employers’ Federation.Labor Economics Annual. Seoul, Korea. (In Korean), 1991 (a).

  • _____. “Problems of Compensation System and a Proposal for Improvement.” (In Korean). 1991 (b).

  • _____. “Profit Sharing and Productivity: Microeconomic Evidence from the United States,”Economic Journal 102 (January 1992): 24–36.

    Article  Google Scholar 

  • _____.Profit Sharing: Does It Make a Difference? Kalamazoo, Mich.: Upjohn Institute for Employment Research, 1993.

    Google Scholar 

  • Lawler, Edward.Strategic Pay. San Francisco: Jossey-Bass, 1990.

    Google Scholar 

  • _____. and L. Porter. “Perceptions Regarding Management Compensation.”Industrial Relations 8 (January 1969): 1–49.

    Google Scholar 

  • Lee, Michael Byungnam. “South Korea.” In Raoul C. Nacamulli, Miriam Rothman, and Dennis R. Briscoe, eds.Industrial Relations Around the World. New York: Walter Degruyter, 1993, pp. 245–69.

    Google Scholar 

  • Levine, David L., and Laura D’Andrea Tyson. “Participation, Productivity, and the Firm’s Environment.” In Alan S. Blinder, ed.Paying for Productivity. Washington, D.C.: Brookings Institution, 1990, pp. 183–235.

    Google Scholar 

  • Ministry of Labour, Republic of Korea.Report on Monthly Labour Survey. Seoul, 1975, 1980, 1985, 1990.

  • _____.White Book on Labour (In Korean), 1989, 1990.

  • Milkovich, George, and Jerry Newman.Compensation. Homewood, Ill.: Irwin, 1993.

    Google Scholar 

  • Mundlak, Y. “On the Pooling of Time Series and Cross Section Data.”Econometrica 46 (January 1978): 69–86.

    Article  Google Scholar 

  • National Statistical Office, Republic of Korea.Korean Economic Indicators, 1991.

  • O’Dell, Carla, and Jerry McAdams.Perple, Performance, and Pay. Houston: American Productivity Center, 1987.

    Google Scholar 

  • Pyo, Hak Kil. “Estimates of Capital Stock and Capital/Output Coefficients by Industries: Korea (1953–1986).”International Economic Journal 2–3 (Autumn 1988): 79–121.

    Article  Google Scholar 

  • Skinner, B.F.Contingencies of Reinforcement. New York: Appleton-Century-Crofts, 1969.

    Google Scholar 

  • Vroom, V. H.Work and Motivation. New York: John Wiley, 1964.

    Google Scholar 

  • Wadhwani, Sushil, and Martin Wall. “The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-Data.”Economic Journal 100 (March 1990): 1–17.

    Article  Google Scholar 

  • Weitzman, Martin L. “The Simple Macroeconics of Profit Sharing.”American Economic Review 75 (December 1985): 937–53.

    Google Scholar 

  • _____, and Douglas L. Kruse. “Profit Sharing and Productivity.” In Alan S. Blinder, ed.Paying for Productivity: A Look at the Evidence. Washington, D.C.: Brookings Institution, 1990.

    Google Scholar 

  • Yoon, Sung-Chun, Sun Lee, and Jung-Han Kim. Analysis of Collective Bargaining Agreements. Korea Institute of Labour: Seoul, Korea. (In Korean), 1990.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. LG Academy, Seoul, Korea

    Michael Byungnamlee

  2. St. Cloud State University, 56301, St. Cloud, MN

    Yinsog Rhee

Authors
  1. Michael Byungnamlee
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yinsog Rhee
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Byungnamlee, M., Rhee, Y. Bonuses, unions, and labor productivity in South Korea. Journal of Labor Research 17, 219–238 (1996). https://doi.org/10.1007/BF02685842

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02685842

Keywords

Search

Navigation