LAWSUIT AGAINST PEAK WAGE SYSTEM

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Controversy continues over wage cuts following the introduction of the peak wage system to guarantee employment security instead of slashing workers' wages gradually. The Supreme Court has recently ruled against cutting salaries based on age, prompting massive lawsuits to demand wage deductions back.

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Korean Air introduced the peak wage system seven years ago. The retirement age was raised from 56 to 60 in return for cutting workers' wages by 10 percent annually from age 56. But some 60 former and current workers say slashing their wages excessively only because of age is unfair because they still have the same workload. They are preparing to file a lawsuit to demand the company return four billion won in deducted salaries. Workers at some of Korean Air's subsidiaries are also recruiting plaintiffs.

[Soundbite] Yoo Young-kyu(Plaintiffs' attorney) : "No alternatives, such as transfers to other departments or new hirings, have been offered. Wages could decline by more than 40% by the time they leave their jobs."

Korean Air says the retirement age was raised in line with a labor-management agreement, adding that the peak wage system is being implemented lawfully. Verdicts on similar lawsuits have varied so far. The Supreme Court has ruled that slashing wages based solely on age should be nullified, but the matter should take into account the amount of wage deductions and workload. Another court ruling says cutting wages excessively to curb costs and workforce by extending the retirement age constitutes age discrimination. Lawsuits are currently spreading to financial institutions such as Kookmin Bank and manufacturing firms such as Renault Korea, which want to know what verdicts courts will issue. POSCO, which has also introduced the peak wage system, is considering freezing wages from the age of 59.

[Soundbite] Prof. Lee Sang-hee(Tech University of Korea) : "The fundamental solution would be the overhaul of the wage system. The key point is mitigating the seniority-based wage system."

The controversy will likely continue as 22 percent of some 340,000 businesses with mandatory retirement policies have introduced the peak wage system.