Wage labour and capital, Juche style
It seems that despite the mammoth environmental destruction, the jetlag and the long periods stuck in claustrophobic metal tubes with screaming babies, air travel does have its advantages. Once again I got a plane yesterday and had a chance to sit down and read a newspaper in a way that I never usually do in this age of News over IP. I picked up a copy of the Hankyoreh as usual and read through their fascinating lead article on what North Korea is actually doing with the wages that workers earn in the Kaesong industrial complex. It turns out that the North Korean government is actually passing on some 75-90 percent of the money they receive from South Korean companies who have factories in the zone to the workers themselves. Albeit that much of this value is actually reaching the workers in the form of payments in kind - essential goods that have been purchased from abroad by the North Korean government through a company run by a Korean-Australian man.
Song said wages go to workers “in a different way.” At first, North Korea’s agency in charge of the Gaeseong industrial complex receives wages from the South Korean companies housed in the Gaeseong complex. Then, the authority deposits 75 to 90 percent of the wages in a bank in Gaeseong. Koryo Commercial Joint Operation then remits the wages and imports some 120 basic necessities such as rice, sugar, and wheat flour. The imported necessities are distributed to the Gaeseong complex workers, Song said.
Song said the authority sends a list to each distribution center that shows the amount each worker is allowed to buy based on wage level. Workers receive necessities between the 10th and 20th of each month after showing their identification cards issued by the Gaeseong complex. The distributed necessities are priced under the North Korean won, but the workers’ real purchasing power is maintained because the prices are converted using the official foreign exchange rate of 140-150 North Korean won to $1, Song said.
Song was asked why North Korea has refused to directly pay wages to its workers at the Gaeseong complex. “In the case of top technicians in Gaeseong, they are paid 20,000 to 30,000 won in the North Korean currency and receive some goods. However, their actual purchasing power is cut by one-third when compared with that of the Gaeseong complex workers [due to unofficial exchange rates on the market]. Due to this disparity, North Korea is seen as reluctant to pay direct wages to the laborers.”
The full, original stories in Korean are here, here and here.
There are two reasons why I find this story particularly interesting. The first is that it is a bit of a poke in the eye for all the regime-changers who have seen the whole Kaesong project as a propaganda godsend with which they can bash the Sunshine Policy and pose, somewhat bizarrely, as people concerned with labour rights, accusing South Korea of being complicit in exploitation and of indirectly funding North Korea’s nuclear programme (see this Korea Times article for previous speculation on how much Kaesong workers get paid). Please don’t get me wrong, I’m not a supporter of corporations using repressive regimes to guarantee low wages and high profits (which is clearly the case however the wages are being paid), but it certainly seems the regime-changers have been proved wrong on the facts in this case.
I also find this story fascinating from an economic history point of view. What we seem to be seeing in the complex and convoluted wage payment process that has been set up by the North Korean authorities is a curious form of interface between state and market. A state that is no longer able to properly fulfil its former role as allocator and redistributor of goods seems to be fumbling for new ways to secure its economic and political base, relying partially on various sorts of market mechanisms. The thing that most strikes me here is the fact that the North Korean state knows that it cannot just allow the Kaesong workers to be paid their full wages (or rather the net wages after taxes/welfare insurance) because of the hugely disruptive effects this would have on society in the area where ostensibly more senior workers in the traditonal industrial sector are being paid so much less. Of course the market in North Korea is already well developed enough that things cannot be kept under control so simply. As the article points out, the workers are still able to realise more of their wages in cash form by taking the goods they receive from the government and selling them on the market, thus enabling them to buy such status goods as TVs (Song’s company sold 105 TVs in Kaesong in the first three months of this year, compared to a total of 3 in the first nine months of last year).
Actually, no.
Even if the numbers stated here are correct (a big if), we know that the regime keeps all the dollars gained by the workers and pays them a fraction of that value in overinflated NK won. Whether they get that in goods or cash does no change the fact that they are getting nowhere near what the South Korean companies are paying for their services.
Of course, we could despense with the guessing game if the two sides would just agree to a guest worker program and let North Koreans take the 3D jobs in South Korea that are currently going to SE Asians.
Comment by Andy — November 9, 2006 @ 1:46 am
The fact that they are being paid in goods does make a big difference to how much of the value of their wages they are receiving. Clearly they are not getting only 2 or 5 dollars’ worth of their wages as people were claiming. This is especially true, as I pointed out, because there is a functioning (perhaps thriving?) market in Kaesong where the workers are able to sell some of their allocations.
Weirdly, this mixed payment system is very similar to the one used under the Choson dynasty to pay wage workers and merchants for the goods and services they provided. It can be highly advantageous to the recipient in an economy where currency is either very unstable or not in widespread use.
Something I didn’t put into the main post but I’ve been thinking about is the question of who is actually doing most of the exploiting here. I have no doubt that the North Korean state is grabbing a chunk of the surplus value created by the Kaesong workers, either for the purpose of maintaining certain welfare systems (as they claim) or for their own devious ends (creating a doomsday device to destroy planet earth as we know it). But just how much of the value being created is taken by the South Korean companies? I would hazard a guess and say that it is considerably more than the North Korean state is taking.
Comment by kotaji — November 9, 2006 @ 10:39 am
The Hankyoreh rarely prints an unkind word about North Korea and as the (only?) pro-government daily in Seoul, has a vested interest in making the Kaesong project look as unexploitative as possible. Their source is a businessman with an even greater interest in making that project look kosher.
Would you be this uncritical about taking, say, the Chosun Ilbo’s interview with a chaebol executive saying Korean capitalists treat their garment workers in Vietnam according to international standards? Didn’t think so.
Comment by slim — November 9, 2006 @ 7:44 pm
Well, let’s see about this story. I certainly don’t take everything I read in the papers at face value, but neither you nor anyone else has provided anything to show that what Mr Song has said is incorrect.
I think you misunderstood my post more generally as being uncritical. I don’t think you will find that I am uncritical of either of North Korea or the South Korean government’s policy toward North Korea. You should be able to see from the post above and others I have written about Kaesong in the past that I am not a cheerleader for exploiting Korean workers in the name of peace and unification. The fact that I accept what Mr Song has said about how wages are paid to be true (barring someone providing me with evidence to the contrary) does not mean that I think this is a particularly good thing - these workers are still being exploited just as Vietnamese garment workers are. What interests me is what this revelation shows us about how the political economy of North Korea is changing.
Comment by kotaji — November 9, 2006 @ 11:01 pm
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