Jobless growth prevails among conglomerates, PEFs

By Park Jae-hyuk

Korean conglomerates and private equity firms (PEF) weren’t able to create jobs as many had hoped, despite achieving significant profitability over the past years, according to data by Statistics Korea and the Bank of Korea.

Their passive attitude toward job creation is feared to be leading Korea into an era of so-called “jobless growth,” which may severely affect the Moon Jae-in administration’s policy for solving the unemployment problem.

Jobless growth or a jobless recovery is an economic phenomenon in which an economy experiences growth while seeing a decrease in employment. The term was coined by the economist Nick Perna in the early 1990s.

Local conglomerates’ operating profit in proportion to sales reached 6.6 percent last year, up from 5.5 percent a year earlier, the state statistics agency said.

However, the number of jobs offered by the conglomerates was 3.68 million, down from 3.77 million a year earlier.

Regarding the nation’s 30 largest groups, they offered slightly more jobs, but the growth rate was far less than their rate of increase in operating profit.

According to CEO Score, a domestic consultancy, 261 affiliates of the 30 groups hired 945,067 workers as of September, up 1.2 percent year-on-year, while their operating profits reached 82.7 trillion won ($76.1 billion) in total, up 65.4 percent from a year earlier.

Moreover, most of the new jobs were irregular positions.

While the number of permanent positions increased by 0.7 percent, those of irregular positions rose by 8.3 percent, implying the quality of jobs has been poorer.

Among the 30 groups, LG, GS, Daelim, Samsung, Hyundai Motor and POSCO offered more jobs than a year earlier.

Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering cut their labor forces by 11.7 percent and 18 percent, respectively, because of the slump in the shipbuilding industry.

KT, Hanjin, Hanwha, OCI, LS, Daewoo Engineering & Construction and Shinsegae also reduced the number of their workers.

Companies taken over by PEFs were no exception.

Data compiled by CEO Score showed the operating profits of three companies acquired by MBK Partners ― ING Life Insurance, Home plus and Coway ― rose by 31.6 percent in total within a year after their takeover, but their investment and employment decreased by 32.3 percent and 3.1 percent, respectively.

UBcare, which was acquired by STIC Investment, also reduced its investment and employment by 32.7 percent and 5.7 percent, respectively, although its operating profit grew by 36.1 percent within a year after the takeover.

Against this backdrop, conglomerates have claimed the increase in operating profits resulted from the reduction of labor forces, saying restructuring was one of their strategies to survive in the challenging business environment.

However, critics said the larger companies should be more socially responsible, citing the country’s small- and medium-sized enterprises offered 320,000 more jobs last year.