Korea Only OECD Member to See Labor Costs Fall
By Yoon Ja-young
Staff Reporter
The unit labor cost in Korea fell last year, as despite businesses enjoying price competitiveness globally, workers' wages decreased amid the economic recession.
According to the Organisation for Economic Cooperation and Development (OECD), Korea was the only country among member countries that experienced a drop.
Unit labor cost refers to the amount of labor cost that it takes to produce one article - the rate declines when wages go down or productivity goes up.
Korea's unit labor cost fell by 1.2 percent in the third quarter from the previous quarter last year, which compares with an average 0.3 percent increase for OECD member countries.
In the United States, which was hit hard by the global financial crisis, the figure stayed the same, while in Japan and Luxemburg the rate rose 0.1 percent. Finland saw a 2.3 percent increase, the biggest rise among OECD member countries, followed by the Netherlands with 1.7 percent.
In a year-on-year comparison, the unit labor cost in Korea for the third quarter dropped by 2.1 percent.
The unit labor cost decreased in each quarter last year compared with the previous year, allowing Korean businesses to enjoy price competitiveness since they could produce more at a cheaper rate.
The country's manufacturing sector, for example, saw its cost fall by 9.7 percent in the third quarter compared with a year ago, recovering the price competitiveness that it had lost compared with other emerging economies.
However, workers have been hit hard.
According to the Ministry of Labor, in 2009, 45.1 percent of workplaces that conducted pay round negotiations froze or slashed wages from a year ago. In 2008, only 13.7 percent froze or cut wages.
It is the biggest ratio since 1997 when the country was hammered by the Asian financial crisis. Back then, 84.5 percent of companies froze or cut wages.
Companies agreed on an average 1.7 percent pay raise last year, down 3.2 percentage points from the 2008 paycheck negotiations. It is the worst figure for workers since 1998 when workplaces cut wages by 2.7 percent on average.
The country coped with the global financial crisis through job sharing, and cutting or freezing wages to refrain from slashing the number of jobs.