A. Outsourcing of Risks
Outsourcing of risk is not merely a business decision but a structural mechanism that transfers and often amplifies workplace danger. Subcontracted workers face low wages, unstable employment, and inadequate safety protections, contributing to the concentration of industrial accidents and rights violations among them. This dynamic ultimately lowers the overall level of occupational safety across society.
B. Multi-Tier Subcontracting in Shipbuilding
Korea’s shipbuilding industry exemplifies this structure. Prime contractors outsource 70–80% of production work—such as welding, painting, and outfitting—to first-tier subcontractors, who then delegate tasks to lower-tier firms or informal labor teams known as Mulryang Teams(These teams receive work assignments from subcontractors and complete them within short, fixed timeframes. Typically composed of 10 to 20 members, each team is responsible for finishing a designated quantity of work within a strict deadline). Subcontracted labor now makes up roughly 63% of shipyard workers, far exceeding the national average of 17%. In many major shipbuilders, subcontracted workers outnumber directly employed ones two- to fourfold.
Multi-Tier Subcontracting Structure in Korea's Shipbuilding Industry
A 2023 survey of 480 subcontractors across the five largest shipyards revealed that among 52,042 subcontracted employees, 23.5% were Mulryang team workers, and 59.2% were direct hires of subcontractors. The increased use of migrant and temporary team labor reflects not only a shortage of skilled workers but also prime contractors’ preference for flexible, disposable labor. Despite this structural delegation, prime contractors retain de facto control over production schedules, safety standards, and management practices. This imbalance is starkly reflected in accident data: of 21 shipbuilding fatalities in 2024, 18 were subcontracted workers.
C. Causes and Problems of Outsourcing Risk
(1) Cost-Cutting–Driven Subcontracting Structure
Prime shipbuilders determine subcontracting fees unilaterally and at extremely low levels, forcing subcontractors to cut corners on safety, training, and labor costs to maintain profitability. Subcontracted workers often endure long hours, night shifts, and unsanitary work conditions, while protective gear and basic consumables are inadequately supplied. The growing reliance on inexperienced or migrant workers—often without sufficient safety training or language support—further elevates accident risks.
(2) Fragmentation and Evasion of Safety Management Responsibility
Each subcontractor maintains its own safety system, leading to fragmented risk management and poor coordination across multi-tiered sites. When safety incidents occur, subcontracted workers—lacking authority or reporting channels—cannot intervene effectively. Although prime contractors control work processes and supervision, they routinely deny liability for accidents by citing the absence of direct employment. This legal fragmentation enables both safety neglect and accountability evasion.
(3) Concealment of Industrial Accidents
The subcontracting system encourages concealment of workplace injuries. Subcontractors often settle accidents privately (gong-sang) rather than file official workers’ compensation claims, fearing contract penalties or reputational damage. Workers, in turn, avoid reporting injuries due to fear of blacklisting or job loss. A 2024 Ulsan survey found that only 21.3% of subcontracted workers’ injuries were officially reported, while 63.1% were settled privately. This practice perpetuates systemic underreporting and deprives workers of proper medical care and compensation.
(4) Prime Shipbuilders’ Refusal to Negotiate with Subcontracted Workers
Despite prime shipbuilders’ effective control over wages, schedules, and safety procedures, subcontracted workers lack a formal employment relationship that would enable direct negotiations. Subcontractors—financially constrained and administratively dependent—cannot meaningfully alter working conditions. This structural disconnect entrenches low wages and hazardous work environments. However, a 2025 amendment to the Trade Union and Labor Relations Adjustment Act addresses this loophole: starting March 2026, companies that exercise actual control over working conditions, including prime contractors, will be recognized as employers for the purpose of collective bargaining. This legal reform marks a significant step toward holding prime shipbuilders accountable for subcontracted labor conditions.
(5) Ineffective Government Policies
Government initiatives promoting “mutual growth” between prime contractors and subcontractors—premised on voluntary cooperation and self-regulation—have yielded limited results. The fundamental issues of wage inequality, employment instability, and safety have persisted. Without binding regulations, these programs have allowed hazardous subcontracting structures to remain intact. Meaningful reform requires stricter legal restrictions on multi-tier subcontracting, clearer distribution of safety and labor responsibilities, and stronger enforcement mechanisms.
The Korean shipbuilding industry’s multi-tier subcontracting system represents a deeply entrenched risk outsourcing mechanism where corporate profit is maintained by displacing the burden of danger and precarity onto the most vulnerable workers. Despite the sector’s global competitiveness, the human cost of this system remains severe. Sustainable change will require dismantling the existing subcontracting hierarchy, legally redefining employer responsibility, and establishing robust state oversight to guarantee labor rights and safety for all shipyard workers.
