Seoul yesterday struggled to prevent South Korean company managers conceding to North Korean wage rise demands for workers in their joint industrial zone in Kaesong.
The South Korean Unification Ministry admitted that about a dozen South Korean companies operating in the zone had — contrary to Seoul’s directions — signed a note promising to pay an increased wage.
North Korea in February unilaterally announced a salary hike for the more than 50,000 North Korean workers employed by the 125 South Korean firms in Kaesong, just north of the border between North and South Korea.
South Korea demurred, insisting that under a previous accord, employment conditions in the zone could only be adjusted with the agreement of both sides. The ministry has said any firms yielding to pressure would face “administrative punitive action.”
As the row intensified, North Korea set a deadline for yesterday for factory owners to pay the increase or provide a written guarantee they would do so.
Any company not complying would face arrears charges.
Unification Ministry officials were scheduled to hold talks with about 20 owners yesterday.
North Korea’s proposal would increase the average monthly sum the South pays for each worker — including allowances, welfare and overtime — from US$155 to US$164.
South Korean firms in Kaesong get cheap labor on top of preferential loans and tax breaks from their government, which also effectively underwrites their investment.
Kaesong opened in 2004 and had survived repeated crises that closed off every other avenue of cooperation between North and South Korea.
However, in 2013 North Korea effectively shut down the zone for five months by withdrawing its workers following a surge in military tensions. Many firms are still reeling from financial losses from the shutdown.
Kaesong is a key earner for cash-strapped North Korea. The hard currency wages are kept by the state, which passes on a fraction — in local currency — to the workers.
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