Japan, Taiwan and Korea share their history of manufacturing and export-led economic development with government intervention (Chang, 1999; Ku & Finer, 2007; Kwon, 2005). During the industrialization period, Korea also developed the so-called "Japanese employment system" with long-term employment, seniority wage, and enterprise union. The two countries also have common problems such as the relatively underdeveloped state welfare, labour market dualism, and deteriorated youth employment situation (Aspalter, 2006; Eun, 2011; Holliday, 2000; Lee, 2011; Lee & Ku, 2007). However, substantial divergences have been observed recently. The youth labour market in Korea is worse than ever, whereas that in Japan has noticeably improved. The more structural distinction can be found in the gaps between the large enterprises and SMEs. Although both countries present relatively large gaps in working conditions by their firm sizes (Lee, 2016), conditions in Korean SMEs are much worse. These differences are not just based on the economic cycle or demographic change but also institutional distinctions embedded in the production regimes.

This book attempts to explain why there is such a large gap between subcontracting/large companies and subcontracted/SMEs in Korea, while it is not the case in Japan nor in Taiwan. By comparing the relevant institutions of Korea with other East Asian welfare states from the early years of industrialization to a period with more apparent shift after 1990's, this study will explore the institutional divergence of the East Asian production regime to explain the current differences. I argue that the comparative advantage of Korean economy in the global market is based on the skill-saving price competitiveness, while that of Japanese economy is based on quality competitiveness and skilled labour; the labour in Korean firms means the 'costs' when it means the 'assets' in Japan. This difference explains the institutional divergence in industrial and subcontract relations.

The book will contribute to theoretical debate about youth labour markets of East Asian welfare regimes and designing new social protection of Korea that matches the future of employment and work.