At 9:30, on Wednesday, October 19, 2022, the government announced the Measures to Narrow the Gap in
the Shipbuilding Industry and Reorganize Its Structure at the emergency economic ministers’ meeting held
in the Government Complex Seoul.
The strike by subcontractors of Daewoo Shipbuilding & Marine Engineering (DSME) in July, has resulted in
the dual structure of the shipbuilding industry emerging as a social issue. President Yoon Suk-yeol ordered
to “review whether wages or compensation for labor of shipbuilding workers are just and to establish
fundamental solutions to tackle the labor market dual structure issues including the shipbuilding industry.”
The dual structure in shipbuilding is a problem that has been accumulating and becoming more entrenched
over more than three decades. Fierce global competition and significantly fluctuating manpower supply and
demand depending on orders taken and process situations have expanded the multi-layered subcontract
structure of primary contractors exacerbated the managerial situations of primary shipbuilders, affecting
their suppliers, thereby further aggravating the working conditions of subcontractor workers.
Despite recent increases of eco-friendly vessel orders and demand for manpower, the shipbuilding industry
suffers serious labor shortages because young people evade jobs in the shipbuilding industry as they are
known to be low-wage, high-risk, and unstable, and skilled workers who left due to restructuring have not
returned. To make it worse, industrial relations in the field have become unstable, threatening industry
productivity and future growth.
Stabilizing shipbuilding jobs requires securing industry competitiveness while resolving the dual structure.
Fortunately, conditions favorable to achieve the two goals concurrently have been created by recent
increases of overseas orders and profitability improvements.
The government plans to implement a strategy to secure a super gap to restore the competitiveness of the
shipbuilding industry concurrently with a policy to address the dual structure. The former (Ministry of Trade,
Industry and Energy) is intended to improve the profitability of the industry and preoccupy the future
technology/material industries, and the latter is meant to secure a fair trade order between contractors and
subcontractors, improve talent recruitment-skilling-compensation systems, and resolve problems such as
industrial accidents and overdue wages.
In establishing its measures, the government based them on agreements of related ministries, paid several
field visits to Ulsan and Geoje, and gathered opinions from labor and management of primary shipbuilders
and their subcontractors as well as experts, to reflect voices of the field in measures.
Since various interests of labor and management of contractors/subcontractors are entangled in the dual
structure issue, the government’s unilateral regulation or financial injection alone, as before, have limitations
in resolution. These measures suggest a new paradigm: to establish solutions through social dialogue via
autonomous solidarity of contractors and subcontractors while the government actively supports
implementation and practice. In other words, keeping in mind that resolving the dual structure is directly
related to the survival and sustainability of the shipbuilding industry, contractors and subcontractors
autonomously strive to tackle the issue, and the government supports their efforts.
1. Establishment of fair contractor/subcontractor trade order and addressing the subcontract structure
The first measure is to establish a fair trade order between contractors and subcontractors and remedy the
subcontracting structure. First, primary shipbuilders and suppliers will sign an Agreement for Mutually-
beneficial Contractor/Subcontractor Cooperation Practice by early next year and support its implementation.
Both contractor groups, via consultation, will establish action plans to establish a fair trade order (paying
proper work progress payments, etc.), share profits with contractor and subcontractor employees,
disseminate job/skill-based wage systems, and rectify the multi-layered subcontract structure.
As incentives for participation in and implementation of the agreement, the government will provide
participating businesses with preferential support for all kinds of bonuses and allowances. Regulations will
be swiftly improved to resolve difficulties regarding migrant workforce and working time, preferential
financial support will be provided, and an industry-level mutual-benefit support package program for the
shipbuilding industry will be created.
To monitor the implementation of the agreement, special committees will be established in regional
quadripartite councils in Gyeongnam and Ulsan, and a government joint evaluation team will be created for
comprehensive evaluation.
A Shipbuilding Industry Win-win Contractor-Subcontractor Consultative Body will be operated from
November to discuss and sign the practice agreement. The government, local government, and experts will
join the consultative body to establish effective measures.
To institutionally support the rectification of the subcontract structure, the shipbuilding standard
subcontract contract form will be improved (Dec. 2022), and disclosure of subcontract payment conditions
will be obliged (the 1st half of 2023). Reported unfair trade cases will be prioritized and swiftly handled. To
understand improvements in the field, related ministries (Ministry of Employment and Labor [MOEL],
Ministry of Trade, Industry and Energy [MOTIE], and Fair Trade Commission [FTC]) will jointly conduct a
survey on the current state of subcontracts.
2. Creating a virtuous cycle between manpower supply, inducing incumbents, and skilling to resolve labor
shortages
The second measure is to create an environment in which new and young workers can enter the industry
and an ecosystem that allows existing workers to continue to work and provides preferential treatment to
skilled workers. From next year, a KRW 1 million employment settlement subsidy will be provided to young
workers when their service periods exceed three months. The number of recipients and implemented areas
of the Shipbuilding Hope Mutual Aid, for up to KRW 6 million installments annually, will be expanded. The
recruitment ladder system—through which shipbuilders provide subcontractor employees with opportunities
to be hired as regular staff—will be restored.
Subcontractor employee welfare benefits will be enhanced by expanding the government matching support
for joint employment welfare funds by business and housing/transportation support. When skilled
shipbuilding retirees are reemployed, promotional subsidies will be provided, and the support period of
elderly continuous employment promotional subsidies will be extended.
The Korea Offshore & Shipbuilding Association (KOSHIPA) will conduct a survey on shipbuilding market
wages by job type/skill level next year to set a basis for job/skill-based wage systems. Training specialized
in responses to industrial structure changes will be preferentially provided to assist shipbuilding workers in
adapting to the industry transition to net-zero, and industry transition joint training centers will be
expanded and installed by shipbuilder.
Measures will be taken in parallel to urgently address labor shortages: prioritizing shipbuilders when
assigning migrant workers with E-9 Visas, expanding the number of employees allowed by establishment,
and utilizing 1,000 additional workers for elastic assignment. Until labor shortages are addressed, the limit
for the special extended work period for manufacturing, including shipbuilding, will be extended to a
maximum 180 days.
3. Stronger protection from industrial accidents and overdue wage risks
The third measure is to thoroughly protect subcontractor shipbuilding workers from industrial accidents and
overdue wages. Shipbuilders shall establish integrated contractor/subcontractor consultative safety and
health bodies to reduce severe industrial accidents, and participate in the occupational safety cooperation
program. The industrial safety management expense allocation/reflection criteria that are currently applied
only to the construction industry will be announced next year to also apply to shipbuilding, and an
Employee Health Center will be installed in Geoje.
To root out overdue wages, planned inspections and ex officio investigations will be conducted, targeting
shipbuilders who frequently delay payments in the Gyeongnam area. A distinguished labor expense
payment/checking system that allows contractors to pay labor expenses into trusted accounts and authorize
subcontractors to withdraw after checking subcontractor wage payment specifics will be established.
Along with the government measures announcement, MOEL, MOTIE, FTC, the CEOs of five primary
shipbuilders, and the President of KOSHIPA announced a Joint Declaration on Win-win Cooperation for the
Re-emergence of the Shipbuilding Industry, with members of the Environment and Labor Committee of the
National Assembly and Representatives in Ulsan and Geoje attending, to pledge for pushing for the
measures to address the dual structure and mutually-beneficial cooperation.
Minister Lee, Jung-Sik of Employment and Labor said, “Now is the time for the shipbuilding industry to rise
from depression and conflict to turn the crisis into an opportunity. The dual structure problem in the
shipbuilding industry cannot be addressed by short-term and stopgap measures, but requires all
stakeholders, including labor and management of contractors and subcontractors, and the government, to
patiently endeavor to produce results.”
He added that “To prevent the measures announced today from being a one-off event, the government will
continuously revise and complement their implementation by monitoring the progress each year over the
next five years. Since it is the first attempt to address the dual structure by industry, the MOEL will do its
best to establish and settle a successful model for win-win cooperation.”