Blunted manufacturing competitiveness setback to economy
The Korean manufacturing sector's labor productivity has sharply weakened since the 2009 global financial crisis, a private think tank said Monday.
According to the Korea Economic Research Institute, the nation's per capita labor productivity grew at an annual rate of 2.8 percent between 2010 and 2017, ranking the country 28th out of 41 countries surveyed. The rate was lower than that of major competitors such as China (8.6 percent), Japan (4.1 percent), Germany (4 percent) and France (2.9 percent). It was far below the average 3.5 percent of all the countries.
The disappointing figure came in stark contrast to the 7 percent rise Korea recorded in the 2002-09 period, fifth-highest following China, Poland, Slovakia and Romania. The average growth rate of the 41 countries stood at 3.4 percent in the pre-crisis period.
Consequently Korea's unit labor cost, a measure of the average cost of labor per unit of output, rose at an annual rate of 2.2 percent in the 2010-17 period while the average rate of the 41 countries dropped to 1.7 percent. Only two countries ― China and India ― recorded faster growth in unit labor costs than Korea after the worldwide financial crisis.
Everyone knows that the growth of labor productivity is a prerequisite to wage hikes. In Korea, however, wages have tangibly risen since the financial crisis while labor productivity growth has dwindled. The minimum wage growth has eclipsed that of labor productivity.
This problem is now more serious as the minimum wage has even risen by double digits in recent years ― 16.4 percent last year and 10.9 percent this year. If this growth trend continues, businesses will have no other choice but to reduce their payrolls to stay afloat.
All this shows why the nation has been experiencing a catastrophic employment situation despite the government's struggle to create more jobs. Jobs don't increase with a government policy of hiring more public workers. When labor productivity goes up at private businesses, jobs follow automatically.
The unprecedented crisis facing Korea's flagship industries is also attributable to the productivity drop. Population aging and the extended retirement age are likely to pull down productivity further. Still, government officials are bent on raising wages and stimulating consumption instead of hammering out ways to boost productivity.
The time has long past for the Moon Jae-in administration to shift from wage-led growth to productivity-led growth.
The Korean manufacturing sector's labor productivity has sharply weakened since the 2009 global financial crisis, a private think tank said Monday.
According to the Korea Economic Research Institute, the nation's per capita labor productivity grew at an annual rate of 2.8 percent between 2010 and 2017, ranking the country 28th out of 41 countries surveyed. The rate was lower than that of major competitors such as China (8.6 percent), Japan (4.1 percent), Germany (4 percent) and France (2.9 percent). It was far below the average 3.5 percent of all the countries.
The disappointing figure came in stark contrast to the 7 percent rise Korea recorded in the 2002-09 period, fifth-highest following China, Poland, Slovakia and Romania. The average growth rate of the 41 countries stood at 3.4 percent in the pre-crisis period.
Consequently Korea's unit labor cost, a measure of the average cost of labor per unit of output, rose at an annual rate of 2.2 percent in the 2010-17 period while the average rate of the 41 countries dropped to 1.7 percent. Only two countries ― China and India ― recorded faster growth in unit labor costs than Korea after the worldwide financial crisis.
Everyone knows that the growth of labor productivity is a prerequisite to wage hikes. In Korea, however, wages have tangibly risen since the financial crisis while labor productivity growth has dwindled. The minimum wage growth has eclipsed that of labor productivity.
This problem is now more serious as the minimum wage has even risen by double digits in recent years ― 16.4 percent last year and 10.9 percent this year. If this growth trend continues, businesses will have no other choice but to reduce their payrolls to stay afloat.
All this shows why the nation has been experiencing a catastrophic employment situation despite the government's struggle to create more jobs. Jobs don't increase with a government policy of hiring more public workers. When labor productivity goes up at private businesses, jobs follow automatically.
The unprecedented crisis facing Korea's flagship industries is also attributable to the productivity drop. Population aging and the extended retirement age are likely to pull down productivity further. Still, government officials are bent on raising wages and stimulating consumption instead of hammering out ways to boost productivity.
The time has long past for the Moon Jae-in administration to shift from wage-led growth to productivity-led growth.
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