[JILPT,

2006. 3. 27]

Employment Relations in the Automobile Industries
of Japan, Korea and China- Focusing on Nonstandard Workers
in Toyota, Hyundai and Shanghai Volkswagen
1. Introduction

Fierce global competition has led to higher concerns for issues such as whether
overall working conditions are racing to the bottom or whether the bipolarizationof wages will be aggravated. However, it is difficult that actors of employment
relations interpret the situation accurately, because they live a reality
surrounded by national laws, institutions, practices and cultures.

Presenting aview with an international comparison in such a circumstance will result in agreat expansion of our recognition.

In this aspect, the automobile industry is an invaluable subject for a case study,
because the basic framework of product architecture and production
technologies have remained mostly untouched throughout its 100-year history
and since the late ‘80s, the so-called “Toyota Production System” or “Lean
Production System” has been benchmarked all over the world as a best practice.
Such features make this industry an appropriate subject for research to decide
whether there is a convergence of institutions and employment relations in
specific countries or continuous divergences under the assumption that the1technical conditions are as similar as possible.

The automobile industry is one

that represents not only advanced nations but also countries that went throughindustrialization at a later stage such as Korea and China, and many times acts
as the pattern setter for employment relations, making it highly suitable forcomparing employment relations by countries.

This paper aims to concentrate on reviewing the case of automobile industriesof the three Northeast Asian countries, Japan, Korea and China, to examine thechanges in each country’s employment relations as well as the similarities anddifferences amidst fierce global competition. As Sumi(2004) summarized well,recent researches about Japanese production system are focused on finding
commonalities amongst divergences of employment relations in many countries.
Using the word “converging divergences”, Katz and Darbishire(2000) pointed
out four common employment relations types found across variations in sevencountries and many companies, which are low wage, HRM, Japanese Oriented,
and Joint team-based workplace practices. They noticed the decline of unions
as well as growing income inequality as a research background, but It would beneeded to handle nonstandard worker issue as a common pattern of
employment relations in Northeast Asia while taking into account the still-militantunions in Korea and the widespread unions in China, though subordinated toCommunist Party.

The three Northeast Asian countries are strongly influencing the world economy
with Japan’s economic recovery, China’s rapid growth, and Korea’s steadydevelopment.

Ever increased trade and direct investments among the three2

countries as well as with the western world contributed to fierce global
competition, and therefore reviewing the impacts of such competition on
employment relations would be significant. Japan is the origin of the Toyota
Production System and China is where most prominent world brands areoperating, acting as the test bed for future competitiveness, leading to an urgent
need for comparing the working conditions and competitiveness related to
employment relations.

“Employment relations” is a concept encompassing individual labor contract andcollective industrial relations with wide-ranging sub-concepts(Bamber &Lansbury, 1998).

This paper plans to examine “nonstandard worker” issue asa sub-topic to best represent the recent situation of employment relations ineach country.

Across the globe, the percentage of nonstandard workers is on

the rise and their working conditions and labor rights are often a source ofcontroversy, and therefore, it would be quite significant to directly handle thisissue using the automobile industry, one of the world’s most representative
industries.

The process of comparing the working conditions of standard andnonstandard workers creates contact points with various sub-topics of
employment relations such as wages and welfare, employment and promotion,
and working hours, making it a valid research strategy in achieving the original
objectives of comparing the employment relations of the three countries.

The cases of this paper are limited to the companies that represent the
automobile industries of the three countries, namely, Japan’s Toyota Motor
Corporation, Korea’s Hyundai Motor Company and China’s Shanghai3Volkswagen. The comparison points of the cases of the three countries are as
follows. The first is how to secure flexibility and low-cost from the corporate
perspective, what the meanings of nonstandard workers are, and how it
emerged and expanded in the process.

The second is the discriminative

factors between standard and nonstandard workers. It would be very difficult todecide whether a certain practice is discriminative or not, but this paper will try
to judge it based on ‘equal work, equal pay’ principle tentatively. The third isoverall features of the employment relations of the given companies examinedthrough the employment arrangements and working conditions of nonstandard
workers. The third point is especially important for the issue of nonstandard
workers has become the node in the recent changes in the employment
relations of each country. That means the nonstandard issue would exist at thecenter of ‘converging divergences’ trend.

This paper is based on research through a visit to Toyota in March 2006 with theassistance of the Japan Institute for Labour Policy and Training (JILPT), twovisits to Shanghai Volkswagen in July 2004 and April 2005 with the help ofChinese Academy of Labor and Social Security (CALSS), and frequent visits toHyundai between 1999 and 2005. This paper also extracts much informationfrom researches at Korea Labor Institute by Seong-Jae Cho et. al. (2004) andSeong-Jae Cho et. al. (2005), which include the three auto company cases aswell as the other cases of numerous automakers and auto parts manufacturers.
This paper will concentrate on the cases of the three companies for clear
comparison, although cases of other companies will be partially introduced asneeded. In terms of literature survey, it should be noted beforehand that a4completely equal comparison of three companies was difficult for there wereless existing literature on Shanghai Volkswagen compared to the abundant
existing researches on Toyota and Hyundai.

However, the stylized facts

organized by this paper through on-site visits and interviews of related
personnel as well as the discussions based on such facts will certainly lay down
the foundation for future comparative researches on employment relations.

Plan of this paper is simple. Features of employment relations at Japan’s Toyota,
Korea’s Hyundai and China’s Shanghai Volkswagen centered on the recent
conditions of nonstandard workers will be followed by a comprehensive
comparison and summarization of the discussion points.

2. Employment Relations at Toyota Motor Corporation

Numerous researches have already been conducted on employment relationsin Japan’s automobile industry. Besides the well-known three wonders of rapid
growth, namely, life-time employment, seniority-based wage and enterpriselabor unions, Toyota Production System which leads the world automobile
industry and the related multi-skilling, teamwork methods and Kaizen activities
have already become common knowledge in the academia. However, havesuch features of employment relations in Japan’s automobile industry remained
the same even with the recent increase in global competition, effects of theaging society and the younger generation avoiding factory labor?
ever increasing overseas Toyota plants affecting Japan?

5Aren’t theThe point to notice in relation to the recent Toyota employment relations ischange in the composition of the labor force caused by the rapid increase in
nonstandard workers.

In general, Japan’s nonstandard workers can broadlyclassified into part-timers in the service sector and in-house subcontractors in
the manufacturing sector.

However, certain conglomerates such as Toyota andDenso traditionally preferred fixed-term contract workers, that means, shortterm contracts for a few months at a time in preparation for seasonal or annualchanges in demand. Although using nonstandard workers have a long history
to respond to temporary increases in production, the percentage remained at
below 10% of the workers directly working in production line for it was a way torespond to temporary needs in itself.

In terms of the number of workers, thiswould mean some 2,000 at the most, but surprisingly, this figure soared up to
11,000.

This rapid increase took place in the last five years, bringing thenumber of fixed-term workers to 3,140 in 2000, 4,610 in 2001, 6,650 in 2002,
7,710 in 2003 and 9,250 in 2004. (Central Research Institute for Industrial
Policy, 2004)

As can be seen in <Table 1>, as of early 2006, a total of 11,000 fixed-term
workers are directly participating in production. The percentage of nonstandard
workers including assistance and relocation (oen and shutkou) and dispatches
stands at 38% of total direct production workforce.

“Assistance and relocation”

in <Table 1> is a unique method of employment management used in Japanesebusinesses, a practice of temporarily sending surplus manpower from anothercompany to Toyota in cases of higher production volumes.

6This is not asurprise for it has continued for decades, but the “dispatch” column is worth
noting, because it is a new form of nonstandard workers Toyota introduced
since March 2004 when the government authorized the dispatch of workers to
production processes in the manufacturing industry.

Although the percentage

is still relatively low compared to directly employed fixed-term contract workers,
Toyota started to utilize nonstandard workers in various forms, which is ameaningful change.

<Table 1> Composition of the Production Workers at Toyota
Fixed-termStandard

Assistance /contract

workers

Dispatch

Total

500

32,000

Relocation
workers

Production Line

20,00011,000500

Improvement,
Maintenance,

10,00010,00012,00012,000Overseas Projects
Production Technology,
Logistics
Total

42,00011,000500

500

54,000Source: Company information (March 1, 2006)

What are the reasons behind such a rapid increase in nonstandard workers?
First of all, the change in production volume needs to be reviewed in relation to
the employment volume.

The Japanese automobile industry recorded thehighest production volume in 1991 with 13.5 million followed by a production
7

volume of approximately 10 million during the prolonged recession after the
burst of the bubble economy, but even a production volume of 10 million
seemed difficult for Japan to maintain with population decreases and theconsecutive constructions of overseas plants. However, the production volume
in overseas plants and the export volume from Japan have been growing
simultaneously since 2001. In case of Toyota, the production volume hit thepeak 4.2 million units at 1990, and dropped to 3.2 million at 1995, but recently
got back to over 3.6 million units. Toyota boasted a steady increase incompetitiveness and could not afford not establishing a production capacity todeal with the increases in demand.

What were the reasons behind increasing nonstandard workers to deal with theincreases in demand rather than hiring standard workers?

This was because

Toyota was not sure if such increases in demand would continue despite theincreases in automobile demands home and abroad.

Especially with thedecease in the population and prolonged recession in Japan, and theconsecutive constructions of overseas plants, it seemed difficult for Toyota toheedlessly make the decision to increase standard workers.

As a result,

Toyota seems to have responded to production increases with a sharp,
temporary increase of fixed-term workers.

However, with the judgment that the production increases have becomestabilized, in other words, with the inference that the uncertainty has decreased,
Toyota has been increasing standard workers during the last two to three years.
For reference, Toyota does not include the number of employees hired following

8their graduation from Toyota Academy in the employment figures for there is asystem in which 100 to 120 people enter the Academy and they are employedby Toyota almost every year.

Excluding these graduates, as of April 1 of eachyear, the number of new standard workers remained at zero in 2000, 630 in
2001, 530 in 2002, and 530 in 2003, which are low compared to the increasing
number of fixed-term workers hired during the same period as has been
mentioned above. However, the figures increased to 1,310 in 2004 and 1,560
in 2005 excluding the graduates of Toyota Academy as can be seen in <Table
2>.

<Table 2> Recent Employment by Toyota
Toyota Academy Graduates
Recruiting ofHigh School Division

Expert Division(junior high gradates,(high school graduates,

completed three-yearcompleted one-year

program)program)

Conversion fromYear

High School
Fixed-term Worker
Graduates

2004

720

590

100

100

2005

660

900

120

120

Of the newly employed standard workers, conversion from fixed-term workers is
noteworthy.

In March 2004, the numbers stood at a mere 150, but rose by six-

fold, surpassing the number of newly recruited high school graduates, becoming
a solid path for nonstandard worker to be a standard worker.

In any event, the number of both standard and nonstandard workers are9currently on the increase at Toyota.

As has been mentioned above, it seems

that Toyota is increasing the number of standard workers with the decision thatthe increased production volume will continue for the time being. At the sametime, the so-called “problem in 2007” or the large-scale retirement of skilledworkers seems to have influenced this trend.

In Japan, the so-called “Dankai

generation,” the post-war baby boom generation, is expected to retire in large
numbers within the next few years, ultimately leading to various labor issues
such as the transfer of skills to which Japanese companies such as Toyota are
responding by increasing the number of standard workers.

The reason why the number of nonstandard workers is still on the rise despite
the above-mentioned trends is because of the uncertainties existing in
production increases and the high mobility of standard workers to help overseas
plants.

Toyota headquarters have provided assistance for production andquality in plants around the world such as the US, China and Thailand, andsignificant numbers of employees are dispatched to these plants to conduct
projects in the initial stages of incorporating new models in addition to theemployees residing overseas.

The number of Toyota employees residing

overseas is said to be at approximately 1,700 of which some 100 aretechnicians promoted from production workers.

Plus, several times that

number are working in overseas plants to assist temporarily and they will returnto Japan when the level of productivity and quality at their respective overseas
plant is stabilized, resulting in one of the reasons to increase fixed-term workers
for their positions in Japan which can not be filled with standard workers during
their absence.

10

It could be understood that the number of nonstandard workers increased inorder to respond to uncertainties and secure flexibility, and at the same time, toprovide employment security for core standard workers, but it also resulted in asignificant save in labor costs with the increase of fixed-term workers due to thelower wages of nonstandard workers compared to standard workers.

Under asystem in which the level of skill increases with years in service accompanied
by an increase in wages, the higher the percentage of fixed-term workers withshorter years in service, the lower the labor costs. Then, what is the level ofcompensation for nonstandard workers?

For fixed-term workers, other thanthe monthly wages, there is also a “full service allowance” for no absences forthree months equivalent to almost a full month’s wage.

If a fixed-term contract

worker were to receive all four full service allowances for a given year, and thefigure is added to the monthly wages and the total is divided by 12, the result isslightly less (2 to 3%) than the wages of a first-year standard worker and theyear-end bonus divided by 12. It is also a part of the HR policy to limit thewages of fixed-term workers to go under that of first-year standard workers.

However, for fixed-term workers, a significant indirect cost also incurs other thanthe direct cost of wages.

Sufficient manpower can not be recruited from the

nearby Aichi Prefecture, leading to a need to recruit fixed-term workers from
Hokkaido to Okinawa whose extra expenses such as those for transportationand moving must be shouldered by the company.
provided, leading to significant costs.

Dormitories must also be

Although extra costs for the welfare ofstandard workers also do incur, standard workers pay for their own dormitory11

expenses.

Despite the large indirect costs which accompany the employment of fixed-term
workers, Toyota prefers the direct employment of fixed-term workers over inhouse subcontract labor unlike other Japanese companies, because direct
employment provides the company with opportunities to interview and select the
fixed-term workers.

Toyota interviews and employs people from across thecountry through team leaders in order to hire people fit for Toyota’s production
system. This does not entail that special skills are needed, but employment
depends on the basic personality and attitude of the candidates.

In this aspect, the recent use of 500 dispatched workers is a new phenomenon.
For dispatched workers, an amount equal to double the direct wages paid to the
fixed-term workers is paid to the dispatching company, and therefore, the cost ispredictable, and other management costs are also stable. On the other hand,for fixed-term workers, the indirect costs are difficult to predict because forexample, the further way the recruiting takes place depending on the labormarket condition, the higher the transportation costs.

Overall, it is assessedthat the costs for fixed-term workers and dispatched workers are almost thesame.

In such a case, Toyota seems to prefer fixed-term workers and uses

dispatched workers as supplementary means which can be confirmed throughthe interview results which show that Toyota has a higher opinion of fixed-term
workers compared to dispatched workers.

Despite the higher cost of employment and maintenance costs for fixed-term

12

workers, the labor cost is significantly low compared to that of standard workers
with an average number of years in service, helping to enhance costcompetitiveness.

However, considering the fact that the Toyota Production

System relies on the high level of commitment and royalty of multi-skilledworkers for the company and work itself, such a rapid increase in nonstandard
workers may result in concerns for Toyota’s level of productivity and quality.

Inreality, such opinions are often being voiced within and outside the company,
and countermeasures have also being searched from various perspectives asfollows: one, to increase the rate of fixed-term workers settling down in thecompany as well as the level of commitment in their work; two, to strengthen
education and training for unskilled workers; and three, to make changes atworkplaces and in work processes to make the work easier for unskilledworkers.

Concerning the first countermeasure, the Japanese government revised thelabor laws to enable contracting for three consecutive years compared to theone year before the revision.

Accordingly, Japanese companies seem to be

utilizing various measures to encourage consecutive contracts. For example,
at Toyota, the daily wage in first contracts is 9,000 yen but increases to 9,500
and 9,800 yen respectively for the second and third contracts. For the second
and third year, the daily wage increases again to 10,000 and 10,300 yen,respectively.

Furthermore, the expiration bonus paid for completing acontracted period starts from 700 yen/day for fourth month and increases to
2,000 yen/day for eleventh month which remains the same for up to three years.
Such incentives are not paid to all fixed-term workers for the initial contract is13set for between four to six months and subsequent contracts are decided
according to evaluations.

As of March 2006, of 11,000 fixed-term workers,

3,500 have been working for one year or longer (or in their second workingyear).

It is clear that the productivity of these workers is higher than that oftransient workers.

Moreover, as has been mentioned above, a certain ratio ofthese workers are employed as standard workers through evaluation and theratio is on the increase, which will lead to a higher level of devotion for thecompany and work.

Concerning the second countermeasure to strengthen education and training
for unskilled workers, Toyota is conducting three-day education and training for
fixed-term workers.

Although it is not certain to what extent education andtraining were strengthened compared to the past, stronger education andtraining could be confirmed at Toyota-related Kanto Motor and Denso.

For

example, Kanto Motor was preparing a building and education equipment fortraining fixed-term workers and Denso prepared a map to enhance the skills of
fixed-term workers as well as standard workers.

The Japanese companies

included in <Table 3> can be interpreted to be displaying the direction of thiscountermeasure.

Japanese companies are realizing a stronger need toeducate and train not only standard workers but also the ever-increasing
number of nonstandard workers.

14

<Table 3> Results of Companies Survey on the Education and Training for
Nonstandard Workers
unit: %
Current Situation

Future Plan

Same asSame asNecessary

Necessary
UnnecessaryStandard

UnnecessaryStandard

Scope

Scope

workers

workers

Fixed-term
12.9

77.4

9.7

18.8

71.9

9.4

7.9

89.5

2.6

18.4

78.9

2.6

7.0

86.0

7.0

14.3

78.6

7.1

7.9

84.2

7.9

18.4

76.3

5.3

workers
Part-Time
Workers
In-house
Subcontrac
t Workers
Dispatched
Workers

Source: Central Research Institute for Industrial Policy (2004)

Various efforts are also being made for the third countermeasure to make iteasier for unskilled workers such as fixed-term workers to perform their tasks bymaking changes in working methods and even in factory layout, but this is notan easy decision to make, because it involves numerous elements and highcosts to be interpreted as a countermeasure for unskilled workers alone.
However, the Set Parts System (SPS) recently becoming wide spread at Toyota
is a prime example. The SPS originated from the Suzumi Plant to which the15visit for this paper was made means providing all parts for a car in one box tothe production line unlike past methods.

During the visit for this paper, theSuzumi Plant was producing seven different models using two lines and eachmodel had various options, calling for a high level of concentration to select,
pick up and accurately assemble the parts.

In the end, fixed-term workers

have a lower level of skills and concentration compared to the skilled workers,
leading to a higher possibility of creating problems in productivity and quality.
Under the SPS, parts are pre-sorted and placed into boxes according to models
and options, allowing the workers to concentrate on the assembly work alone,and even unskilled workers would be able to learn the functions easily.

Inorder to put the SPS into action, changes happened in the floor layout such as
preparing a space to sort parts on the second floor of the plant according to thenew method, and although such changes can not be said to be solely due to theincrease in the number of nonstandard workers, it is said to have significantly
influenced the decision of the management.

Thus far, the changes in Toyota’s employment relations during the last few
years have been reviewed focused on the expansion of nonstandard workers.
As can be seen, a variety of efforts have been made in order to maintain thepositive aspects of the Toyota Production System and secure the flexibility of
employment and production. In other words, Toyota has responded to the risein demand by increasing the number of nonstandard workers centered on fixedterm workers. Toyota has had an intention to prevent a situation in which thecompany heedlessly increases the number of standard workers without theconfidence that the production volume will continue to increase and ends up not

16

being able to protect them later on. This also means preparing for the return ofthe personnel dispatched to overseas plants for assistance.

Yet, productions

have increased for the last few years and net profits have been recording above
the one-trillion-yen each year, leading to recent increases in the employment ofstandard workers. This is also to prevent the vacuum of skilled workers withthe retirement of the Dankai generation.

Along with the consideration ofelements purely related to employment, the increase of nonstandard workers
will also result in a clear reduction of costs.

On the flip side, however,increasing nonstandard workers may create problems in productivity and quality.
Therefore, Japanese No. 1 company is making efforts to enhance thepercentage of nonstandard workers settling down in companies and the level ofdevotion to their work through measures such as reorganizing work processes
and strengthening training for even nonstandard workers, and extending
contract periods and making it easier for nonstandard workers to become
standard workers.

Despite such efforts, it is forecasted that the increase in thepercentage of nonstandard workers will negatively affect the evolution of the
Toyota Production System, because it will add the burden on the standard
workers to monitor and correct mistakes by nonstandard workers.

3. Employment Relations at Hyundai Motor Company

The Korean automobile industry started from the 1970s in effect and achieved
the world’s fifth largest production volume in the mid-1990s, recently
experiencing rapid progresses in advanced markets such as the US and Europe.

17

Hyundai, in particular, is almost the only company with its headquarters in adeveloping country to achieve independent development, laying down a firm
foundation in the process by independently developing engines and models,and using Hyundai’s own brands. In 1999, Hyundai acquired Kia Motors which
was Korea’s second largest automaker, but went bankrupt just before thefinancial crisis of 1997. Hyundai currently possesses the world’s seventh largest
production capacity including Kia. Furthermore the maker surprised experts withalmost same quality index to that of Toyota or Honda in the US market in thelast few years.

Yet, as is well-known, Korean companies including Hyundai face numerous
problems related to employment relations arising from confrontational labor
relations and the subsequent yearly disputes. Although it is not the fundamental
goal of this paper to shed light on the reasons behind the repeated disputes andconflicts, such a phenomenon and related elements will be indirectly revealed
by reviewing the contents related to nonstandard workers.

The format of employing nonstandard workers at Hyundai is basically in-housesubcontracting, which means commissioning to a small-scale company
independent management of a part of the production activities.

Therefore, in

principle, workers of Hyundai and those of in-house subcontracting agencies do
not work together, and the workers of in-house subcontracting agencies are
standard workers of that agency and are not nonstandard workers of Hyundai.
However, in reality, standard workers of Hyundai and workers of in-housesubcontracting agencies work side-by-side in the same space using the same18

tools, and therefore, the workers of in-house subcontracting agencies can beprescribed as nonstandard workers of Hyundai. Furthermore, unlike Japan,
using dispatched workers directly in production processes in the manufacturingsector is still prohibited by law in Korea, and having workers of in-housesubcontracting agencies and standard workers of Hyundai work side-by-side
can actually be said to be dispatched labor, and charges have been brought topublic prosecutors as the Ministry of Labor judged this to be illegal dispatches inlate 2004.

In other words, Hyundai Motor Company is involved with theaccusation that there are illegal activities in relation to nonstandard workers.
The judgment by the Ministry of Labor on illegal dispatched labor was a result of
charges brought up by labor unions, namely, Hyundai’s use of nonstandard
workers is faced with criticism by the labor circle and civic groups.

How many nonstandard workers are working at Hyundai?

<Table 4> displays

the changes in the number of nonstandard workers in Hyundai’s three major
plants.

According to <Table 4>, the number of nonstandard workers

decreased slightly in 2005, but the figure increased sharply in all three plants inthe five years from 2000 to 2004.

During the same period, the number ofstandard workers newly employed stood at a mere 105 in 2000, 75 in 2001, but
after that year, 947 in 2002, 984 in 2003, 1,286 in 2004, and 64 in 2005. As aconsequence, the percentage of nonstandard workers (limited to blue-color
staff) started from 16.9% just before the financial crisis and rose to 27.5% in
2002, and has remained at that level ever since. This figure is based on thenumber of workers employed by the in-house subcontracting agencies
authorized by Hyundai, and it has been said that the actual percentage of19

nonstandard workers surpasses 30% if the numbers of temporary and contract
workers employed by the in-house subcontracting agencies to handle changes
in production volumes are included.

<Table 4> Changes in the Number of Nonstandard Workers at Hyundai Motor
Company
Factory

2000

2001

2002

2003

2004

2005

Ulsan

4,868

5,934

6,975

7,409

7,686

7,043

Jeonju

658

622

703

824

848

740

Asan

789

825

903

1,013

1,037

1,034

Total

6,315

7,381

8,581

9,246

9,571

8,817

Source: Company information

What are the levels of compensations for nonstandard workers at Hyundai
Motor Company?

A comparison of the compensation level of in-housesubcontract workers and that of first-year standard worker reveals that the basic
wage is at 80%, but the ratio falls to the 66%-level when all items such as yearend bonuses are included. Although nonstandard and standard workers have
similar opportunities to acquire skills and work side-by-side on similar tasks,
workers of in-house subcontracting agencies are only paid two-thirds of thecompensation of standard workers of Hyundai for the sole reason of being
nonstandard workers. In the end, as has been mentioned above, the labor
circle and civic groups have accused this to be illegal dispatched labor and suchaccusations are grounded on the above-mentioned wage discriminations.

20

The above shows that the nonstandard worker issue at Hyundai has become asignificant social issue.

For Toyota, this issue can be narrowed down toeconomic issues such as the possibility of maintaining the Toyota Production
System, but why has this become a social issue for Hyundai?1

In order toanswer this question, a detour may be necessary to discuss the point that thelevel of skills found in standard workers in Korea are not as high as those ofstandard workers in Japan and that the management does not emphasize thelevel of skills on the shopfloor.

There is a larger emphasis on the role ofengineers in relation to production technologies and production management,
and, on the contrary, the role imposed on blue color workers only focuses on
maximizing work ethics and minimizing mistakes in production.

The trial

production line installed at the R&D center absorbing massive investments is aprime example displaying such recognition by the management. In general,
preparations for the mass production of new models are conducted on existingproduction lines and in the process, skilled workers play a large role indiscovering problems and making improvements, but at Hyundai, themanagement does not trust the workers and their skills, and have installed atrial production line at the R&D center so that the engineers themselves canprevent all potential problems in quality.

Clearly, the use of a trial production

line may also be due to the lack of trust that production workers will
enthusiastically search for solutions to problems amidst such confrontational
labor-management relations.

1

This is also related to the characteristics and position of union. As is well-known,
Toyota union is not militant. Therefore Toyota union won’t raise a nonstandard work
issue as a social problem like Hyundai union.

21

If Hyundai does not expect the Japanese-style skills encompassing problem
solving and efforts for improvement from the production workers, education andtraining systems similar to those of Toyota will not develop.

According torelated research by Seong-Jae CHO et al (2004), Hyundai puts a largeremphasis on moral and general knowledge education related to labor ethics,
and job-related education is limited to certain indirect departments such as
maintenance, quality control, machine tools and metal molds.

If priority is not given to the skills of the production staff and appropriate
education and training to enhance their skills is not provided, it would be more
profitable for the management to use nonstandard workers with lower wages
rather than standard workers with longer years in service and consequently
higher wages. Hyundai’s wage system is similar to that of Toyota in that thewages increase according to age and years in service, but whereas at Toyota,
the evaluation of skills plays a crucial role in this process, at Hyundai, thewages are increased almost automatically according to years in service.

Inother words, Toyota uses a competency qualification system whereas Hyundai
decides the wages through collective bargaining between labor andmanagement, leaving no room to reflect individual evaluations in wages.

In anutshell, the age-wage profile bent towards the upper right corner and the lackof skill enhancement systems and the related deficiency in education andtraining systems push the management to minimize the employment ofstandard workers and increase the number of nonstandard workers as much as
possible.

22

Despite the recovery in production volumes since the financial crisis, Hyundai
minimized the number of new standard workers and continued to increase thenumber of nonstandard workers due to the above-mentioned structural factor.
However, Korea’s labor movement is still militant and stands by its leftist
position, but the Hyundai labor union, one representing Korea’s labor unions,seems to have accepted such discrimination within the workplace and tolerated
the increase of nonstandard workers.

In order to shed light on the reasons forsuch a phenomenon, the following history of Hyundai’s labor-management
relations needs to be reviewed.

The labor union at Hyundai Motor Company was established in 1987, which
was a time in Korea’s history when political democratization was rapidly
progressing. It was followed by the unionization of the production workers who
had been thus far oppressed with very low wages and long working hours andeven worse, despotic control at shop-floor. After gaining some power, union
members refused to perform dirty, difficult and dangerous (the so-called “3D”)
tasks on the work floor and tolerated such tasks to be outsourced to in-housesubcontract workers.

From the employer’s point of view, the more thecompany outsourced, the higher the savings in costs, so this was actively
pursued by employers.

As a result, in the mid-1990s, even before the financial

crisis, the number of in-house subcontract workers surpassed 4,000 within
Hyundai Motor Company.

In 1998, Korea experienced the financial crisis and the operation rate of23

Hyundai Motor Company fell to below 50%, leading to employment adjustmentsof some 10,000 people including some permanent and compulsory layoffs.
This left an irrecoverable scar in the labor-management relations at Hyundai,
leaving the workers feeling that there is a lack of employment security and thatthe employer may dismiss them at any time, resulting in lower loyalty andweaker sense of “my company” in terms of work morale. In this process, atighter unity under the union flag to secure employment security was formed
and at the same time, there was recognition for a need for a safety valve in
preparation for layoffs.

In the end, with the collective bargaining of 2000, thelabor and management of Hyundai agreed to limit the percentage ofnonstandard workers to 16.9%.

From the employer’s perspective, thisagreement was an official recognition from the labor union to discriminate
workers within a single plant up to a certain percentage, and from the union’s
perspective, this agreement meant that there was a pool of workers who would
be on the top of the list for adjustments in case of rapid deterioration of
economic conditions such as the experience of 1998. In other words, they werealso able to secure a buffer for employment adjustments.

However, the employer and the union expanded the percentage of nonstandard
workers to above the agreed 16.9%, and in the end, the percentage rose to
30% of the total production staff considering all direct and indirect department.
Nevertheless, the level of skills and functions of Hyundai’s standard workers is
not high, leading to a reason for the employer to increase nonstandard workers
as much as possible regardless of direct or indirect job.

Besides, as could beseen after the late 1980s, the standard workers avoided hard work and24

tolerated the request by the employer to increase nonstandard workers without
much resistance.

In the process of production increases since 1999, thenumber of nonstandard workers soared for they were used to accelerate
production speeds.

Even if the union executives attempted to maintain the

16.9% level, it was difficult to discover all tacit agreements between union
representatives and heads of departments on the shop-floor, and in the end,
union executives failed to prevent the steady increase in nonstandard workers.

However, even though Korea’s labor unions are composed of only standard
workers in an enterprise, and although Hyundai union made a collusion with theemployer for the sake of their stable status and easier tasks, the unions
achieved significant progress in improving the conditions for nonstandard
workers by pressuring the employers with their militant features and strong
sense of egalitarianism.

The unions made efforts to reduce economic

discrimination at the very least, even if those efforts do not go up to employment
status itself. As a result, although the compensation for in-house subcontract
workers is two-thirds of that of first-year standard workers, the wage level ofstandard workers at Hyundai is so high that the wages of nonstandard workers
have become higher than the standard workers of most SMEs in these years.
This created yet another distortion in the labor market, leading to concerns
about aggravating the shortage of labor at SMEs.

In sum, the increase of nonstandard workers at Hyundai ironically stems fromthe low level of skills possessed by standard workers. If the level of skills
possessed by standard workers is low and the production system relies mainly25

on engineers, employers are attracted to increase as much as possible thenumber of nonstandard workers who receive lower wages. Especially under asystem in which the wage automatically and mechanically increases according
to the years in service unlike the West where the wage is based on the job orwork performed, the employers all the more would hesitate to employ new
standard workers and attempt to increase nonstandard workers.

Such asituation was aggravated by the consultation between the employer side andthe union of standard workers who did not feel they had employment security
and saw nonstandard workers as a buffer for their own employment security.
However, due to the criticism and accusation by external labor movements andcivic groups concerning such employment status and wage discriminations,
Hyundai Motor Company was judged by the Ministry of Labor to be illegitimately
using dispatched workers and is currently subject to judicial judgment.

Suchjudicial judgment would become meaningless if dispatched work is legallyauthorized for direct participation in production in the manufacturing sector as is
the case in Japan.

However, even in such a case, social conflicts surrounding

discrimination will not die down easily.

Furthermore, the recently revised Labor

Act still prohibits dispatched workers directly participating in production in the
manufacturing sector, leading to the inevitable result of Hyundai continuing to
be involved in the current complex game surrounding nonstandard workers.
Besides, concerning economic compensation, the absolute wage level ofnonstandard workers experienced ground-breaking increases thanks to theefforts of the union of standard workers during the past few years, but suchchanges left workers at SMEs feeling relatively deprived.

26

4. Employment Relations at Shanghai Volkswagen

The Chinese automobile industry experienced rapid growth with the active
introduction of foreign capital following the period of reforming and opening the
economy in the 1980s, recording the third largest production volume only after
the US and Japan in 2005 and surpassing Germany.

Most world-renown

automobile makers are currently operating in China including GM, Toyota,
Volkswagen and Hyundai mainly in the form of 50:50 joint ventures with
Chinese companies, because the Chinese central or local governments do notallow these MNCs(Multi-National Corporations) to have majority.

Shanghai Volkswagen is a joint venture company between Germany’s
Volkswagen and one of China’s top three automakers Shanghai Automotive
Industry Corp, created in 1985 as the first company with foreign capital. At one
time it boasted market dominance with a market share of above 60%, but its
leading

position

is

being

challenged

withmulti-national

corporations

competitively making inroads into the market resulting in a market share of
below 10%.

Shanghai Volkswagen also utilizes nonstandard workers widely.

Compared tothe total of 15,000 standard workers, some 6,000 are employed as dispatchedworkers(lao-wu-gong by Chinese).

In China, “lao-wu-gong” is a concept

similar to dispatched workers in Korea or Japan with labor supply agencies
recruiting workers from rural areas as well as nearby and providing them to thedemand companies, and therefore, sometimes called “rural factory workers,”

27

but at Shanghai Volkswagen, most dispatched workers are residents ofShanghai metropolitan.

They are employed by the labor agencies, whatever it

is public or private, but receive instructions from and work at the company towhich they are dispatched, working side-by-side with the standard workers ofShanghai Volkswagen.

The dispatched workers at Shanghai Volkswagen are said to receive a direct
wage similar to that of first-year standard production staff.

The costs forrecruiting and maintaining are paid to labor agencies by Shanghai Volkswagen,and of the five social insurances, some are paid by the Shanghai Volkswagen
directly to the government and others are paid through labor agencies.

Someof these social insurances are linked with private insurance companies and forthese insurances, the conditions are less satisfactory compared to that ofstandard workers.

Dispatched workers join on one-year contracts, renewable

for up to three years, and the wages for the pre-contracted period are
guaranteed even if Shanghai Volkswagen does not need the dispatched worker
any more. Some may become standard workers at Shanghai Volkswagen, but
most who did become standard workers were those higher levels of educationand skills from the recruiting point. Dispatched workers are classified into subgroups by their skill levels in this company.

The contract and working conditions of dispatched workers at Shanghai
Volkswagen are much better than those of other Chinese companies, butnevertheless, the working conditions and compensation level of dispatchedworkers are below that of standard workers. Why is Shanghai Volkswagen

28

operating a discriminatory employment system in China where there isabundant low-cost labor? In order to understand this situation, the working
time system and rank system used by Shanghai Volkswagen needs to bereviewed.

From August 1, 2004, Shanghai Volkswagen introduced the working time
account system.

This is a system that had been used in Germany from someten years before by German automakers such as Volkswagen, which allowed
workers to accumulate the hours they worked overtime in individual accounts to
use in times of recession, enabling workers to receive stable income regardlessof the production volume and ultimately protecting them to a certain extent fromthe risk of employment adjustment during recessions. From the employers’
perspective, they freely adjust the plant operation time according to the changes
in demand while being able to guarantee stable income for the workers at thesame time. The so-called “decoupling” of the plant operation time and individual
working time is made possible, creating a win-win situation.

Shanghai Volkswagen named such a working time account system the“breathing system,” meaning that the plant operations could be adjusted as
freely as breathing. As can be seen in <Table 5>, various methods can be
combined and used within the breathing system, but the breathing system
across a job lifecycle mentioned in the last line has not been applied in China
yet because wages can not be carried over for more than one year in China
unlike Germany. The maximum deposit of working time is 432 hours per year
within the scope of legal framework, but in reality, up to 500 hours are allowed29per year, and can fall to minus 168 hours, but if it falls to below minus 168 hours,
various forms of employment adjustments are incorporated.

<Table 5> Types of Breathing Systems at Shanghai VW
Flexible

Working
Adjust work hours daily to enhance work efficiency

Hour System
Shift System

Adjust shifts such as two or three shifts according to market demands

Work Days

Adjust work days flexibly within the fixed weekly hours
Adjust work hours flexibly during the period of the ages between 22 and 55

Job Lifecycle(early retirements are also possible)

Source: Organized according to interviews in July 2004

However, when such breathing systems are introduced, difficulties arise fromnot only having to manage individual time accounts, but also to allocate workers
to perform various tasks at various time periods.

For breathing systems to beestablished, the multi-skill level of the workers needs to be upgraded and aworkplace culture to incorporate various tasks and layouts needs to exist.
Shanghai Volkswagen clearly notifies the workers of such frequent changes inallocation when signing a contract, and some 3,000 people have actuallychanged positions in one year. However, this alone is not enough to complete
the complex workplace according to the working time account system, and thenumber of dispatched workers increased in order to fill the gap created by thelack of a functional pool to the extent necessary for the working time accountsystem.

Furthermore, if wages are decided according to the job and work

performed, changes in allocation will not as easy as expected, leading to a need30

for a third party to fill the gap.

For this reason, dispatched workers with various

levels of skills exist at Shanghai Volkswagen unlike at other Chinese companies.

The wage system of Shanghai Volkswagen needs to be reviewed at this point inorder to clearly understand the relation between standard and nonstandard
workers. <Diagram 1> displays the new framework for wages and promotionsin use since April 2004.

As can be seen in this diagram, Shanghai Volkswagen

has seven job categories, and different competency levels exist within each job
category with promotions and compensations measured with comprehensive
consideration of job and competency level.

Upper job groups are divided into

management and expert paths. In the lower groups of Z, A and B, the highest
possible competency levels according to jobs are predefined and therefore,
there is internal competition to move to better job groups.

Under such systemof wages being decided according to jobs and competency levels, changes inallocations may be more difficult than expected, and a need for manpower tosupplement the gap created by free choice of working time arises.

At

Shanghai Volkswagen, almost 30% of the manpower is made up of dispatchedworkers, created in the process of operating the above-mentioned time andwage system.

31

<Diagram 1> Wage Levels according to Job Classifications and Skill Levels at
Shanghai VW
F 4
E 3
.

D 2
.

Wage level
C 10

.
.

.

B 10

.

A 8
Z 10

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Job and Rank.

Z
Production
AssistantA
Production
Staff

D

B

C

Technician

ExpertTechnician

Management

E
SeniorF
Special<- Expert

P thExpertExpertExpert===Grade 3

Grade 2

Grade 1<-Manager

ManagerManagerManager

P thSource: Organized relying on interviews, therefore, comparison of wage levels
by each level may not be accurate

32More fundamentally, Shanghai Volkswagen wished to introduce various models
at various times to the Chinese automobile market for which the competition isconstantly becoming fiercer, and in this process, needed to secure flexibility.
With the business environment in which Shanghai Volkswagen has had asecure number one position in the market for two decades is changing,
Shanghai Volkswagen looked to the working time account system as a measure
to secure the flexibility of plant operations.

However, can the need to secure

flexibility alone sufficiently explain the high rate of nonstandard workers
recording 30%?

Another company related to Shanghai Automotive Industry Corp, one thatcreated a joint venture with GM, Shanghai GM, had a percentage of dispatchedworkers at below only 1% at the time of July 2004.

In order to interpret thereasons for such a difference, the employment system for standard workers andcompany history needs to be reviewed.

In China, it is common for standard

workers to work on one-year contracts or two to four-year contracts according tocompanies and job categories. However, they can not be forced into layoffs
after ten years in service, meaning that work until the retirement age isguaranteed.

For Shanghai Volkswagen, there were already a significant

number of workers with long periods of service since 1985 at the time ofproceeding with the joint venture, coupled with the lack of flexibility in theoperation of the manpower created by the some 4,000 workers transferred fromthe Shanghai Automotive Industry Corp on two different occasions in the late1980s.

Compared to Shanghai Volkswagen, Shanghai GM, which opened its

33

doors in 1996, had hardly any workers transferred from the Shanghai
Automotive Industry Corp and had a flexible operation of the manpower
centered on younger workers thanks to its short history, resulting in apercentage of dispatched workers of less than 1%.

Another reason behind the high percentage of dispatched workers at Shanghai
Volkswagen is the need for cost cuts.

The protection of employment forstandard workers with long-term services and working time account system
coupled with rigid job and competency level systems also exist at theheadquarters in Germany to a certain extent, but the percentage of nonstandard
workers in China is much higher, which needs to be explained.

This isbecause price competitiveness has become vital with fiercer competition in the
Chinese automobile market.

Also, the Chinese situation in which almost an

infinite supply of dispatched workers is facilitated unlike Germany needs to beconsidered. Dispatched workers are utilized in various ways such as allocating
dispatched workers to perform simple tasks in Z and A job groups, or using
dispatched workers with higher competency levels to temporarily substituteempty positions for skilled workers.

Concerning the last factor, the unique production technology and job
organization system of Shanghai Volkswagen needs to be noted. Within theworkplace, there are high-tech ergonomic facilities such as tilting systems or
natural lighting methods which can also been seen in the German factories, but
at the same time, numerous workers can also be seen conducting welding
processes which have already been substituted by robots in all advanced plants.

34

There is abundant floor space and the equipment and plant facilities are very
advanced, but such features exist along with labor-intensive methods in theoperation of the work organization commonly found in underdeveloped
countries.

Under such a situation, a need for numerous low-wage workers to

conduct peripheral tasks arises along with an incentive system for workers withhigher class jobs to manage and supervise these workers.

The fact that theabove-mentioned system which determines the wages and promotions
according to job and competency was introduced relatively recently at Shanghai
Volkswagen displays that it needed desperate measures to handle the fierce
competition with its HR structure.

In short, Shanghai Volkswagen still relies on labor-intensive technology systems
and work organizations, has a higher percentage of high-cost workers with longterm services compared to Shanghai GM due to its longer history, and has asomewhat rigid wage system based on job and competency level; and underthese conditions, must equip themselves with price competitiveness andintroduce the working time account system to secure flexibility of plant
operations, which ultimately resulted in nonstandard workers making up 30% of
the total manpower. There is hardly any discrimination concerning wage for
nonstandard

workers

comparedto

one-yearstandard

workers,

but

discriminations exist in social insurances and above all, nonstandard workers
are exposed to a lack of employment security.

35

5. Comparison of and Implications from Employment Relations in the
Automobile Industries in the Three Countries

A look at the automobile industry case as well as the overall economy reveals
that there are some areas of concern related to employment relations inNortheast Asia, which boils down to the rapid increase in nonstandard workers
during the recent few years at Toyota, Hyundai and Shanghai Volkswagen, thecompanies that represent the three Northeast Asian countries.

Nonstandard

workers refers to those who are not standard workers per se, therefore,
possesses an innate instability, leading to a need to limit the grounds for theutilization of nonstandard workers such as the wishes of the labor supply sideand the temporary needs of the labor demand side.

However, the cases of thethree companies show that nonstandard workers are generally used in regulartasks, which should be viewed from the perspective of overall lower quality ofjobs.

It should also be pointed out that whether it be social or economic, there

is a possibility for discrimination for the key factor was to create peripheral
manpower to secure the employment of core standard workers, as could beseen in all three companies.

Despite the similarity of increases in nonstandard workers, the type, reasons
behind the increase and the state of utilization differ significantly among thethree companies of each country.

First, the basic type of nonstandard workers

differed with fixed-term contract workers at Toyota, in-house subcontract
workers at Hyundai, and dispatched workers at Shanghai Volkswagen due todifferences in the institutions, labor market environment and management36

strategies of each country.

For example, as Japan authorized the use of

dispatched workers in direct production in the manufacturing sector, Toyota
which preferred fixed-term contract workers prior to the authorization started to
employ dispatched workers, and in China, workers are dispatched by publicagencies (or semi-public agencies) to manufacture plants, which are
institutional environments significantly different from that of Korea which
prohibits dispatching workers to directly participate in production in the
manufacturing sector.

Even amidst the legal restrictions in Korea, a mixed

work organization with standard and nonstandard workers working side-by-side
which is actually similar to dispatched labor is in operation and as a result,
Hyundai is faced with strong criticism by the labor movement and civic groups.

It is difficult to clearly compare the percentage of nonstandard workers in thethree companies.

At face value, the 38% Toyota admits using in direct

production process appears to be the highest, but the figures for Hyundai andShanghai Volkswagen using the same criteria can not be found, and the criteria
used by Hyundai and Shanghai Volkswagen are significantly different fromthose of Toyota. Therefore, comparison against the number of total employees
regardless of job category shows that the figures at Shanghai Volkswagen are
surprising the highest with Toyota and Hyundai recording similar levels.

Thehigh percentage of dispatched workers at Shanghai Volkswagen reflects thefierce competition in the Chinese automobile market, but at the same time, isrelated to the practice of actually using dispatched workers similarly to standard
workers.

In China, it is common for even standard workers to renew contracts

every year until a worker reaches ten years of service, and dispatched workers

37

at Shanghai Volkswagen have their contracts almost automatically renewed for
up to three years. Furthermore, some dispatched workers possess significant
skill levels and unlike other Chinese companies, are recruited from theShanghai metropolitan area rather than rural areas.

Nevertheless, acomparison of the percentage of nonstandard workers at the three companies
itself does not hold much significance due to the difference conditions in which
each company operates.

What is more important is the fact that thepercentage of nonstandard workers have continued to increase in all threecompanies.2

The high percentage of nonstandard workers poses a problem not only because
they lack employment security, but because there is a possibility of
discrimination compared to standard workers.

Compared to the first or

second-year standard workers with similar years in service, nonstandard
workers at Hyundai face significant discriminations even in overall wages, andnonstandard workers of all three companies face discriminations related towelfare and social insurances.

However, the discriminative elements wererelatively smaller in Toyota and this seems to be due to the serious shortage oflabor and the tendency of younger workers to avoid the manufacturing sector inJapan unlike Korea and China.

Despite these features, the percentage ofnonstandard workers increased due to its contribution to higher pricecompetitiveness whether intentional or not, displaying a reality of working
conditions racing to the bottom in all three countries.

2

I could not grasp how many nonstandard workers at SVW had been increased inrecent years. However, I heard that the number had become higher.

38

<Table 6> Comparison of Employment Relations of Nonstandard Workers at
Companies Representing Japan, Korea and China
Japan

Korea

China

ToyotaHyundaiShanghai Volkswagen

Representative
Company (Case)
Frequently between 1999
VisitsIn July 2004 and April 2005

In March 2006
and 2005

Number of
64,00050,00015,00012,00010,000

6,000

15.8%

16.7%

28.6%

Standard workers
Number of
Nonstandard
Workers
Percentage
Basic Form of
Fixed-term Contract
Nonstandard

In-House Subcontracting Dispatch
Labor

Workers
Almost equivalent toOverall Wage

66% of that of first year

Almost equivalent to that ofstandard workers

first year standard workers

that of first year
standard workers
Free use ofLower level of welfare

dormitories,

compared to that provided

Lower than standard
Indirect

workers in terms of social
Compensationtransportation

to standard workers, but

expenses, etc

better than external SMEs

insurance, etc

39

Work

Numerous labor-intensive

High functional
Low functional flexibility

Organization

Other

flexibility

processes

Rapid increase in the Labor-management

Secured flexibility with thenumber of

introduction of various

conflicts and social

nonstandard workers controversy concerning

working time systems andin the recent fivethe issue of nonstandard used nonstandard workers

years

workers

to supplement such systems

How far will the number of nonstandard workers continue to increase?

Or willit be oppressed by socioeconomic factors? In relation to the economic factorsof the technical systems and work organizations, the conditions of the Toyota
Production System, for example, should be reviewed along with issues related
to social factors such as the labor movement directions and changes incollective labor-management relations. According to visit to Kanto Motors, anaffiliate of Toyota, in October 2005, the percentage of nonstandard workers
stood at 50%.

This figure is even more shocking considering that thiscompany produces Lexus, the luxury models, exported to the US.

Usingstrategies to gain price competitiveness by increasing nonstandard workers iscertainly a concern related to employment relations.

Nissan Shatai Company

Limited, to which the visit was also made in October 2005, also had
nonstandard workers making up 50% of the manpower at production line, andtherefore, the percentage of nonstandard workers in large companies such as
Toyota may not increase any more, but the possibility that the percentage ofnonstandard workers will become higher in Japan overall can not be ruled out.
Such a possibility can be confirmed in the Japanese electronics industry which40

is exposed to even more international competition compared to the automobile
industry, and as a result, has a high propensity to use in-housesubcontracting(Ukeoi by Japanese) very widely.

In China, the high-tech industry and the traditional industries are developing at
the same time, and therefore, technological systems and work organizations
related to employment relations are also complex.

However, according tovisits to some 20 automakers, auto-part makers and electronics companies, thebasic production methods were still labor-intensive, even at leading companies
such as Shanghai Volkswagen, and in this aspect, incentives for using lowwage labor will inevitably continue to exist. However, the Chinese labor market,
compared to the Japanese or Korean labor market, strongly resembles thefeatures of the Western labor market based on job evaluation and high mobility;
and workers with superior skills and higher education are experiencing rapid
increases in their income, and therefore, the wages of workers with relatively
lower levels of skills and competencies are suppressed even further and thewage gap with skilled workers is expected to widen more and more.

In Korea, there are more cases of technology-intensive production methods
centered on automated processes rather than the labor-intensive production
systems of China or the Japanese production system centered on skills andorganizational capacities, and therefore, the demand for supplementary labor toprovide assistance to machinery is expected to increase.

However, a certain

portion of workers perform such simple labor with the position of standard
worker due to the institutional factor of protection by labor unions which already41

have vested rights, and the others are outsiders working with the status ofnonstandard workers, lacking rational economic compensation, inevitably
leading to the aggravation of social conflicts.

Ultimately, there is a highpossibility that the use of nonstandard workers will not expand any further due
to social criticism and legal and institutional constraints.

Recently in Chinaalso, the protection of labor rights is being strengthened due to widening wage
gaps and increasing labor-related disputes, and therefore, it is forecasted that
discrimination of nonstandard workers will be suppressed to a certain extent
due to not only economic and technological factors but also social factors evenin China.

However, the existence of workers to perform simple tasks infinitely

supplied from rural areas will prevent a noticeable reduction of the wage gap inthe short-term, and in the end, the minimum wage policy of each province is
expected to act as standards for the protection of unskilled workers.

Amidst the current global competition, securing flexibility is becoming
increasingly more crucial and in this aspect, the companies representing thethree countries are responding in somewhat different ways.

As have been

explained before, from the aspect of employment flexibility, all three companies
are utilizing nonstandard workers, but the forms and factors are quite complex.
The differences in employment flexibility among three companies are related tothe structures and strategies each company take while choosing the flexibility ofworking hours, wages and work organizations.

Shanghai Volkswagen

introduced the working time account system developed in Germany leading to asomewhat complex condition.

Toyota has focused on functional flexibility

centered on multi-skill in the workplace and seems to be opting for strategies to42

utilize fixed-term workers within the limit of not disturbing functional flexibility.
Hyundai Motor Company is strongly relying on mechanical flexibility within
automated processes and is utilizing overtime and weekend labor to secure
operational flexibility.

The more crucial such flexibility becomes in global competition, the more it
results in the side-effect of lower stability from the labor perspective.

This

paper reviewed the weakening of employment security centered on the issue of
nonstandard workers, but even for standard workers, the stability of working
hours, wages and tasks is continually becoming lower.

Furthermore,

institutional devices such as labor unions have become much weaker with the
exception of Korea, making negotiated flexibility through labor-management
cooperation more difficult for the time being.

Thus far, through a prism of nonstandard workers, the employment relations ofJapan, Korea and China were compared centered on the cases of automakers
representing the three countries.

The comparison revealed that despite theworld-wide use of the Toyota Production System and the similar pressure offierce global competition, the details still remained very different.

Suchdiversions in employment relations of the three neighboring countries inNortheast Asia can be interpreted as an implication of the importance ofinstitutions and practices, and of the ever more importance of the strategies by
the labor, management and government. We live in the times of ‘converging
divergence’.

43

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