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The paradox of the "Yellow Envelope Bill"

Published: 25 Aug. 2025, 00:04

Ha Hyun-ock

The author is an editorial writer at the JoongAng Ilbo.

President Lee Jae Myung departed for the United States on Sunday to attend a Korea-U. S. summit, where detailed tariff negotiations are expected to take place. Accompanying him were the heads of Korea’s four largest conglomerates and other leading business executives, who joined the presidential delegation as part of an economic mission. Their role is not limited to discussing specifics of cooperation agreements, such as the shipbuilding partnership that paved the way for a tariff deal, but also includes arranging corporate gifts for U.S. President Donald Trump. Announcements of new Korean investments in the United States, scheduled for the summit, also rest on their shoulders.

Stressing teamwork between government and industry, Lee held what he called a “strategy session” ahead of the trip. On Tuesday, he met with the executives joining the delegation and urged them to deliver tangible results. “I ask the companies accompanying me to create substantial outcomes on the ground,” he said. In today’s Korea, where corporate leaders are routinely enlisted to serve national interests abroad, it is not unusual to view them as public servants in everything but name.

The "Yellow Envelope Bill" passes in a National Assembly plenary session in western Seoul on Aug. 24. [JOONGANG ILBO]

On the same day as Lee’s meeting, leaders of major business associations and industry representatives gathered at the National Assembly to protest the “Yellow Envelope Bill,” a proposed amendment to the Labor Union and Labor Relations Adjustment Act. The legislation expands the definition of employers, broadens the scope of labor disputes and limits companies’ ability to seek compensation for damages caused by strikes. Business groups pleaded for revisions, warning of severe consequences. Their appeals, however, were ignored. On Sunday, as Lee boarded his flight to Washington, the Democratic Party passed the "Yellow Envelope Bill" through the Assembly.

The contradiction was stark: While the president looked to businesses for national strength, lawmakers tightened legal restrictions on the same companies. This disconnect prompted comparisons to what a senior presidential aide described as Korea’s “land of paradoxes.” At a press briefing on Wednesday, Kim Yong-bum, the senior presidential secretary for policy, dismissed concerns about the law, noting that similar fears accompanied past reforms such as the Multiple Unions Act and the Serious Accidents Punishment Act. “After those laws passed, new social rules emerged and maturity followed,” Kim said. “We live in a land full of contradictions, but also progress.”

Business leaders, however, see little progress in what they regard as a tightening web of regulation. Their criticism is not that reforms lack justification but that one-sided measures undermine their legitimacy. The government insists that the commercial code revisions, labor law changes and workplace safety initiatives represent efforts to align Korea with global standards. Some elements do. Yet the “Yellow Envelope Bill,” in particular, raises serious questions about whether it will achieve its intended goals.

The law’s supporters frame it as a step toward harmony between contractors and subcontractors and toward higher productivity. Ideally, this could be true. But the risks loom large. With employer definitions widened, subcontractors could hold main contractors accountable even without direct contractual ties. For large firms with thousands of subcontractors, this could mean endless bargaining sessions and near-constant disputes. Legal battles could sap corporate resources, diverting management attention away from innovation and competitiveness.

If the law triggers a cycle of strikes, disputes and prolonged negotiations, cooperation will fade and productivity will decline. Worse still, the ban on damage claims against unions would increase corporate burdens. Faced with recurring strikes, large contractors might sever contracts with subcontractors prone to labor unrest. They could also scale back domestic operations and expand overseas, where labor relations are less restrictive. Critics warn the act could function less as a shield for workers than as an “offshoring promotion law” or a “deindustrialization act.” Acceleration of automation, and thus job losses, is another likely side effect.

Even if an outright exodus of factories abroad is improbable — since companies remain tied to local facilities and national expectations — the increased costs may eventually push firms to shift investment elsewhere. The irony is that a law meant to protect labor could end up eroding the industrial base and threatening jobs in the long term.

Consumers would not be immune either. If strikes drive up costs and companies are unable to recoup losses from unions, the expenses will likely be passed down in the form of higher prices. Delays in production and supply chains could further raise costs, with households ultimately shouldering the burden. In this sense, the “Yellow Envelope Act” risks transferring the cost of strikes from companies to society at large.

Korea Enterprises Federation (KEF) Chairman Sohn Kyung-shik holds a news conference to express his concerns regarding proposed revisions to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, also known as the "Yellow Envelope Bill," at the KEF office in Mapo District, western Seoul, on July 31. [NEWS1]

The question remains what kind of paradox this law will create. Will it lead to a surprisingly effective model of labor-management cooperation, as its supporters hope, or will it, despite its intentions, strangle both workers and companies in a tangle of disputes? Optimists argue that the legislation can always be revised if problems arise, but that reassurance offers little comfort to businesses now bracing for uncertainty.

As Lee seeks to strengthen economic ties with Washington with the backing of corporate leaders, his own ruling party has simultaneously imposed new constraints on those same companies at home. That contradiction lies at the heart of Korea’s current policy debate — a nation striving for global competitiveness while embracing laws that may undercut the very industries it relies upon.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.