Works Councils and Unionization: Lessons from South Korea

This study analyzes the impact of effective works councils and unions in large South Korean firms. Following a brief review of economic theory on works councils and the institutional environment of Korean industrial relations, we describe the unique data set used to analyze Korean firm-level labor relations and economic performance. The results of the multivariate analysis show that both effective works councils and unions enhance employee voice on several key personnel practices. In addition, the estimates show that unionization increases wages and reduces turnover, but effective works councils are associated with higher levels of employee satisfaction and somewhat higher productivity. These estimates are consistent with theoretical models that find that carefully designed works councils can enhance employee voice and may increase productivity.