By Mary Jordan
Washington Post Foreign Service
Tuesday, May 5, 1998; Page A01

SEOUL—For years, shady Pagoda Park has been a downtown gathering place for old men. They come, often with new canes and worn stories, to see their friends, argue about politics and get free Monday haircuts.

But lately there are younger faces in the park, and hundreds more men every day. Some, neatly dressed in suits and ties, hide out here because they are ashamed to tell their children and neighbors they have lost their jobs. Others have confessed their sudden job loss but, like bricklayer Hong In Sou, can't bear to sit at home.

"See, I have no calluses," Hong said, holding out his mighty hands. "For the first time in 30 years, I have no calluses."

The lack of work this year has healed his hands but emptied his bank account. He takes his bankbook out of his pocket as proof. South Korea has a paper-thin welfare safety net, the cash-strapped government is in no shape to build one, and many companies offer little or no unemployment benefits. Hong, his wife, mother and sister all live on the $370 a month the sister earns washing dishes.

Five months after South Korea nearly went bankrupt, the country is in the midst of a historic social upheaval. A $58 billion rescue program by the International Monetary Fund has stabilized the country's financial markets, at least for now, and deflected some of the international attention that focused on Seoul late last year. But the costs of the bailout -- in the form of layoffs, pay cuts and a dramatic drop in the standard of living for millions of South Koreans -- are only beginning to be felt.

According to government figures, 8,000 people a day are losing their jobs -- including 720,000 people in the first three months of this year.

Meanwhile, wealthy Koreans are earning bundles as banks, desperate to attract deposits and bolster the Korean currency, offer 20 percent interest rates.

"This crisis is destroying the middle class," said the Rev. Chang Dok Pil, a Catholic priest who this month turned a bright, clean room at the Myongdong Cathedral into a soup kitchen with a bulletin board for jobs. "What is left are the rich and poor."

On the surface, Seoul doesn't look so different. The department stores are still packed and the roads still full of cars. But look a little closer, and there are lots of new sights and sounds these days.

At night, in this city where a quarter of the country's 44 million people live, more and more alleys are lighted by strings of bare bulbs over makeshift restaurants called "covered wagons." There, cooks pay little if any rent for the tarp overhead and earn a living serving glass noodles and spicy cabbage kimchi on card tables to office workers who have given up more costly indoor restaurants.

Bicycles and motorcycles are becoming more popular as some families turn in their cars, many of which are loaded onto ships headed for Russia. At the colorful outdoor Nam Dae Mun market in central Seoul, homemakers have joined the wholesalers who flock to the 24-hour bazaar after midnight, when prices are discounted.

The beep of a pager used to seem like the national song because so many people -- as many as one in four South Koreans -- had one clipped to trousers or tucked into a purse. Now the pagers are being tossed aside as an expendable luxury, and department stores are gathering used electronic devices by the thousands to export.

Lee Seung Jae, a civil engineer for LG Construction Co., said he feels lucky to have a job, but he is one of the millions who have taken sharp pay cuts. His was reduced 30 percent.

"My wife wants to work, but we have an 11-month-old," the engineer said, eating dinner with two colleagues in a covered wagon restaurant in a downtown alley. To save money, Lee has postponed buying a car, canceled his cable TV subscription and tossed out the pager that his wife used to keep in touch with him.

Car sales are down 50 percent, and every day it seems that more tire and auto-parts shops are going out of business. Hyundai Motor Co. recently announced plans to lay off 20 percent of its 45,000 employees.

This time last year, South Korea still had the feel of a country that could claim First World wealth. Cash-flush Koreans were dining on weeknights in expensive steakhouses, while tourists from abroad were drawn to the cheap outdoor food stalls for traditional food and atmosphere. "Now it is reversed -- Koreans are eating at places like this, and foreigners are eating in the expensive steakhouses," Lee said.

Last year's 2.5 percent unemployment rate is expected to triple this year, and one of the government's biggest worries is that angry out-of-work protesters will cripple the economy with strikes, possibly scaring off badly needed foreign investment.

Those fears are well founded: On last Friday's May Day holiday, more than 20,000 union members and student sympathizers confronted police in violent protests that resulted in at least a dozen injuries. President Kim Dae Jung has vowed to arrest many leaders of the demonstration, saying, "Violent protest cannot be tolerated."

Kim, long an ally of the labor movement, is facing increasing anger from the unions. Earlier this year, he worked out a no-strike deal with major unions, persuading them that "everyone must share" the pain of restructuring. But that deal is clearly in trouble now, as protesters on Friday carried banners that read "Kim Dae Jung Is the Enemy of Labor."

Those protests, the first violent street action against Kim's policies since his inauguration in February, illustrate the depth of the problems Kim faces with workers angry over layoffs and increasing foreign investment in Korea. Recently an Israeli firm, discussing the purchase of a troubled manufacturing company, became alarmed when employees demanded "consolation" money simply because of the change in ownership. The workers eventually relented.

"These kinds of things will give us a bad reputation," said You Jong Keun, one of President Kim's closest advisers and governor of North Cholla province, Kim's home territory.

You said the new administration, elected in December, wants to help the jobless and knows it is behind in establishing government programs for them. But he noted that the president isn't getting much help from the legislature.

Parliament is controlled by the former ruling Grand National Party, which has blocked and delayed many of Kim's efforts, including a budget that includes money for unemployment insurance and job training.

To help out, the government plans to cut public school fees for tens of thousands of youngsters in elementary and high schools across the country. Even though public high school fees are relatively low -- perhaps $600 a year -- in some cases even that has become unaffordable.

While many very wealthy people have seen their businesses ravaged, for those with money, this is not a bad time.

To halt the free fall of the South Korean currency, the won -- which has recovered slightly after losing more than half of its value against the dollar earlier this year -- banks have offered interest rates of more than 20 percent for accounts in won.

That meant profits for the rich, who were guaranteed a big return on their savings accounts. But for everyone else, corresponding high interest rates on loans make it impossible to borrow money to buy a car, start a business or save one.

And some workers who have been laid off can't bring themselves to let their families know. They dress for work each morning and leave, except their goal is a leisurely hike in the foothills outside Seoul, or a quiet day in places like Pagoda Park.

"In the Orient, losing face is a serious mental blow," said You, the presidential adviser. "For Korean men in particular, having no place to go every day is a terrible psychological shock."

One day recently, a man in a blue business suit, carrying a leather briefcase, was walking around the park. He was hoping he might meet someone to start a business with, he said.

He talked for a long time about his dreams of selling the herbal medicines in his briefcase. He showed samples.

When his guests started to leave, he asked them to stay. He said he had no place to hurry off to. He had lost all his money, and his family had left him.

Special correspondent Hyewook Cheong contributed to this story.