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I'm reading a book about the economic development of South Korea during the 'miracle' period.

One of the points the author makes is the following:

A major source of industrial disputes was delayed wages, a mechanism whereby companies attempted to pass the burden of slack business on to their workers by withholding wages (just as [they] passed the slack on to dependent sub-contractors by delaying payments).

I get that slack is unused inputs, which would in this case be the wage laborers and the capital that the sub-contractors produce. But what's the point of withholding wages in response in having excess productive capacity? If it matters, the companies of interest here are the Chaebol conglomerates.

(the book is The Politics of Economic Reform in South Korea: A Fragile Miracle)

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  • $\begingroup$ Delaying payment until after a task is completed and accepted incentivizes the agent performing the task to finish quickly and correctly. I would imagine this is the reason for this practice $\endgroup$ – DornerA Jun 25 '16 at 16:21
  • $\begingroup$ @DornerA I see, so you're saying that production was very inefficient, and as a result the businesses temporally lost out on productive capacity (in the case of sub-contractors) and general profitability (in the case of employee labor). And so as long as that remained the case, the business refused to accept the cost of those wages; effectively 'passing the burden' onto the workers. Thanks $\endgroup$ – Antecedent Jun 25 '16 at 19:28

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