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More Investment Needed to Reduce Underutilization
The International Labor Organization (ILO) has said the added value produced by Korean workers reaches only 68 percent of that of the United States. It said Koreans work 2,305 hours a year on average, the longest among 54 countries subjected to ILO research. Given this, the labor productivity is about one third of the U.S., and about half of Japans.
ILO noted Koreas labor productivity has continued to increase from 28 percent of that of the U.S. in 1980. But the nation seems to have a long way to go in its bid to bring its industrial competitiveness level up to the international standard in terms of its labor potential. Worrisome is that the wage increase rate in recent years has far surpassed those of industrialized countries, despite lackluster productivity.
Sluggish labor productivity can be attributed mainly to low economic growth rate, among others, as a result of businesses tendency of avoiding new investment. The current governments seemingly anti-business policies such as increasing regulations have dampened investment sentiment. Steady rise in the number of civil servants has also led to more regulations.
Lack of productivity has been more conspicuous in the service sector than in the manufacturing area. According to the LG Economic Research Institute, the nations service productivity is equivalent to only 31 percent of that of the U.S.
A growing number of people are seeking jobs in the service industry, thus lowering productivity, amid a dwindling job market due to lingering low economic growth. The nations service market is now facing offensives from foreign companies following the establishment of the free trade agreement with the U.S. Should productivity continue to remain low, the service industry will meet serious challenges.
ILO cited the need to release workers underutilized capacities by raising their productive potential, which should be at the top of the international development agenda. It also noted many people are working hard and long but without the conditions they need to improve themselves and their families.
As ILO pointed out, an increase in productivity is mainly the result of a firms better combining capital, labor and technology. A lack of investment in people for training and skills as well as equipment and technology can lead to an underutilization of the labor potential.
We need to do away with an outdated work style and incompetent business culture. Many foreigners cite unstable industrial relations when it comes to the image of Korea. Trade unions excessive demands for higher wages have led to weak potential. We cannot catch up with the Western industrialized countries in terms of labor productivity with the current antagonistic relations between labor and management in place. |
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