Dec. 12, 2017
On December 12th (Tue.) the government announced 'measures to improve jobs in the construction industry', which were prepared jointly by the Presidential Committee on Job Creation (i.e. Presidential Job Committee) and relevant government agencies to create construction jobs that allow the expertise of construction workers and the value of work performed by them to be fairly assessed.
The measures were created through discussions at the construction subcommittee* (a tripartite consultation body, chairperson: Kim Myung-soo, a professor at the Catholic University of Korea) of the Presidential Job Committee set up last September.
* The subcommittee is comprised of fourteen members, including public officials from the Ministry of Land, Infrastructure and Transport, the Ministry of Employment and Labor, the Ministry of Strategy and Finance and the Fair Trade Commission, people from the Construction Association of Korea, the Korea Specialty Contractors Association and FKTU- or KCTU-affiliated construction workers unions and private experts
According to the measures, ten specific tasks will be carried out to achieve the following three goals: to guarantee the payment of wages to construction workers more strongly; to improve their working conditions; and to secure a skilled construction workforce.
Construction is the largest single industry, employing 1,850,000 people (7% of all employed people), and one of the major industries providing working-class jobs in Korea.
However, of people employed in the construction sector, 73% or 1,360,000 are non-regular workers and thus have less employment security and a low level of income. (In 2016, construction workers earned an average of 2.67 million won per month, 78% of the average for all industries.)
In particular, the construction industry is ageing rapidly as young people avoid construction jobs because of their poor working conditions, such as repeated pay delays and exclusion from various social security schemes. The government's diagnosis of this problem is that it is urgent to improve the quality of jobs in the construction industry.
The government considers that only when construction workers, the backbone of the construction industry, can receive fair and just treatment commensurate with their expertise, will the quality of construction improve and the construction industry become innovative and healthy.
It says that the key purpose of the measures is to change the construction industry from a 3D industry to a 3S industry, namely, a stable, safe and secure industry.
The measures come at a time when illegal foreigners are eating into jobs on construction sites as the inflow of young Korean workers into the industry is declining.
The comprehensive measures, including raising the income levels of construction workers, improving their working conditions and providing clear career prospects for them, are expected to be highly effective in expanding the domestic skilled construction workforce and improving productivity in the construction industry which is relatively low*.
*Labor productivity in the construction industry was 33% of that for the manufacturing industry. (Korea Productivity Center, 2014)
The main features of the measures are as follows.
【1】Guaranteeing the payment of wages to construction workers more strongly
① The 'electronic payment system'* that requires project owners to make such payments as wages and subcontract payments directly to subcontractors in order to prevent salary delays will be expanded across all public construction projects.
*The system restricts construction firms from withdrawing wages, subcontract payments, etc., and only allows them to send such payments to workers' accounts, etc. (Public Procurement Service's subcontractor payment system, Seoul Metropolitan Government's e-payment system, etc.)
Immediately after the announcement of the measures, the electronic payment system has begun to be applied to all construction contracts awarded by the Ministry of Land, Infrastructure and Transport (MOLIT) and its affiliated institutions.
*In the case of new construction contracts, the change is reflected in their invitations to bid, and in the case of continuing construction contracts, the relevant construction firms are notified that the way payments are made has changed.
The Electronic Procurement Utilization and Promotion Act and the Framework Act on the Construction Industry will be revised to mandate the use of the electronic payment system across all public construction projects from next year.
*The government will encourage direct electronic payment across private construction projects by favoring companies which use a similar system with the function of preventing salary delays when evaluating mutual cooperation between companies and giving them bonus points during the bidding process.
② The government will introduce a wage payment guarantee scheme under which in the event of a pay delay, a guarantee agency (e.g. Korea Specialty Contractor Financial Cooperative) pays the overdue wages on behalf of the company (Act on the Employment Improvement, etc., of Construction Workers due to be amended in 2018).
All public and private construction projects* will be mandatorily required to be covered by the scheme. The scheme will guarantee each construction worker up to 10 million won, the equivalent of his/her three months of wages, and require project owners to pay guarantee fees reflected in construction costs to the construction firms with whom they contract.
* Construction projects with a total cost of less than 50 million won, which are not subject to the Framework Act on the Construction Industry, will be excluded.
③ The government will also introduce a prevailing wage system.
A prevailing wage system is a system that obligates construction firms to pay at least the wage rate set by their project owners to prevent any reduction of construction workers' wages in the multi-tier contracting process. It is being implemented in the U.S., etc.
To begin with, given the impact the prevailing wage system might have on the entire construction industry, it will be implemented on a pilot basis in about ten workplaces each year for two years under the supervision of an MOLIT-affiliated institution.
The system will be implemented in a full-fledged manner from 2020 after evaluating the outcomes of the pilot project and reforming the system of calculating the market unit wage, on the basis of which the prevailing wage rate is determined.
【2】Improving working conditions for construction workers
① The government will take the following measures to remove the welfare blind spot for construction workers.
First, the proportion of construction workers covered by social security will be increased by raising the premium rates that should be reflected in construction costs, in line with the extended coverage* of the national pension and health insurance schemes and introducing a premium payment confirmation system for private construction projects.
* Currently, to be eligible for workplace-based insurance coverage, a construction worker must have worked in the workplace for at least 20 days. → The required minimum duration of work will be reduced to eight days which will take effect in late 2018.
Second, the daily contribution amount construction workers should pay into the retirement mutual-aid scheme will be raised from 4.200 won to 5,000 won, and the scope of eligible construction projects will be expanded (any public project worth 300 million won or more and any private project worth 10 billion won or more → any public project worth 100 million won or more and any private project worth 5 billion won or more).
Third, welfare on construction sites will be improved by refining the criteria* for installation of amenities, such as toilets and locker rooms, on construction sites and stepping up crackdowns on those failing to comply with the criteria.
*The criteria for installation of toilets, locker rooms, etc., will be subdivided according to type of construction work (building work, civil engineering work, etc.).
② In order to strengthen protection for people engaged in renting construction machinery, one-person business owners who directly operate construction machinery will be allowed to be automatically enrolled into the retirement mutual-aid scheme.
The government will also reform the way rental payments are guaranteed (on a contract basis → on a workplace basis), toughen the punishment against construction companies which fail to sign up to the rental payment guarantee scheme and introduce late payment interest which is levied on overdue payments.
③ The government will also implement measures to improve the quality of jobs in the construction design and engineering business.
First, project owners will be required to check whether the constructor has properly paid the design company when screening bids for turnkey or private investment projects.
Second, the price-focused design and engineering bidding system will be reformed to introduce a comprehensive bid evaluation system in which bidders are assessed based not only on their bid prices but also on their technological prowess (1st half of 2018).
【3】Securing a skilled construction workforce
① The government will introduce a construction technician grading system to ensure that construction workers can get commensurate rewards, such as higher pay and regular employment status, as they build up their experience.
*The government will unify relevant databases and create a grade classification system between 2018 and 2019 and reflect it in the construction business registration criteria, construction capacity assessments, etc., from 2020.
② The government will introduce an electronic work management system (e-card, fingerprint recognition) across construction sites to systematically manage construction workers' careers and to minimize the number of construction workers not covered by social insurance. MOLIT will take the lead by starting to implement it across its construction projects with a total cost of at least 30 billion won in the second half of 2018.
③ The government will designate a hub training institution* for construction workers in each region and continue to increase the number of trainees and diversify training programs in order to strengthen education and training for construction workers.
*In 2018, one hub training institution will be designated in the capital region where there is high demand for training.
④ The government will step up crackdowns, etc., to expel illegal foreign workers.
At the same time, it will toughen punishment, for example by increasing the level of punishment against principal contractors and subcontractors which violate labor laws.
*A two-strikes system will be introduced for those engaged in illegal multi-tier subcontracting. If a construction company has been found in violation twice or more over the course of seven years, its business registration will be cancelled.
Moreover, the government will implement measures to help construction businesses create new and decent jobs.
First,the government will introduce incentives for construction companies with a good record of creating employment, such as those hiring more regular employees. For instance, it will give such companies bonus points when evaluating their construction capacity or bids and thereby expand their chances of winning public construction contracts.
Second, the government will objectively examine the construction cost calculation standards and the construction project contracting system to see whether institutional improvements are needed to secure proper construction costs and will actively redress various unfair contract terms set by public institutions.
*A task force involving relevant government agencies, including MOLIT and MOSF, will be set up in Feb. 2018 to come up with improvement measures in the second half of 2018.
Third,the government will come up with a 'plan to enhance the competitiveness of the construction industry' whose features include improving the regulations on business areas, supporting the industry's overseas expansion and strengthening its design and engineering capabilities, as soon as possible and then undertake reform of the industrial structure to create new jobs.
An MOLIT official said that the measures will be implemented as planned so that construction jobs can be perceived as professional and respected jobs.
He added that additional and complementary tasks will be sought out actively in close consultation with the Presidential Job Committee, etc.