By Choi Sung-jin
Jobs are rapidly disappearing from large manufacturers for various reasons, which shows that Korea needs new ways to increase employment, economic experts say.
As of last Sept. 30, out of 147 listed companies affiliated with the nation's 20 largest conglomerates, the number of jobs declined from the end of 2014 in 66 companies and stood still in four others, according to a recent analysis of employment trends.
At Samsung Electronics, for instance, the number of employees at home had dropped by 825, or 1 percent of its total payroll, compared with the end of 2014. The world's largest smartphone maker increased the number of workers by 5,000 in 2013 and 3,500 in 2014, but the trend turned downward last year, the report said.
"The biggest reason for the reduced hiring was a worsening financial situation, as shown by the fall in sales over the past few years," said a Samsung Electronics executive. The company's turnover stood at 200.65 trillion won ($168.57 billion) last year, down 3 percent from 2014.
A private economist said Samsung Electronics' case is indicative of overall trends in the manufacturing sector.
"It is proof that new employment is falling across the board in Korea's flagship manufacturing industries," said Korea Economic Research Institute vice chairman Bae Sang-keun. "The actual scope of payroll cuts might have been far bigger if we consider the situation of the final quarter of last year, when a large number of workers retired due to the age limit or voluntarily."
Another reason for the "employment cliff" is most manufacturers' reluctance to build plants or expand existing ones. Kia Motors, for instance, cut its payroll by 43 workers last year compared with 2014. "Over the past decade or so, there has been almost no change in our total payroll except for some who were converted from temporary to permanent workers," a company official said.
This means sluggish employment in the auto industry for nearly two decades was due to the lack of plant construction or expansion. Hyundai Motor has built no factories since its last one in Asan, South Chungcheong Province, in 1998.
High wages are also to blame.
"At a time when global automakers are staging fierce cost-cutting competition, it will be difficult for Hyundai Motor, whose average labor cost of 97 million won ($81,500) exceeds Volkswagen's 90.62 million won, to increase employment," said Lee Hang-koo, senior fellow at Korea Institute for Industrial Economic and Trade (KIET).
Factory automation is also taking jobs. Steelmaker POSCO cut 489 employees last year. "We have trouble transferring employees whose jobs have become redundant because of automation," said a POSCO official. "We have managed to maintain the overall employment size thanks to the extension of the retirement age, from 56 to 58, from 2013, but its effects are about to disappear soon."
And the situation may become worse. Korea's three largest shipbuilders reduced their combined payroll by only 354 over the past year. If their backlog orders for offshore plants are fulfilled by next year, more jobs are sure to go.
Daewoo Shipbuilding and Marine Engineering, which registered a record 5.5 trillion won loss last year, plans to dismiss another 3,700 workers by 2019. "Even if the shipbuilding industry recovers, we will be unable to hire more employees because Chinese shipyards are rapidly chasing us through drastic restructuring," said a Samsung Heavy Industries executive.
The situation is little better in the shipping industry. Korea's two largest shipping lines, Hanjin and Hyundai, have been cutting their payrolls since the industry fell into a slump in 2011. Their combined number of employees stood at 3,658 in 2011 but fell 25 percent to 2,739 last year.
To expand employment, experts are calling for the focus to be on domestic services industries.
"It has been proved that the existing industrial structure of Korea focusing on large manufacturers and exporters can no longer increase jobs," said KIET president Kim Do-hoon. "The nation can increase employment only when it changes its focus to the services sector, which requires a lot more people."
Jobs are rapidly disappearing from large manufacturers for various reasons, which shows that Korea needs new ways to increase employment, economic experts say.
As of last Sept. 30, out of 147 listed companies affiliated with the nation's 20 largest conglomerates, the number of jobs declined from the end of 2014 in 66 companies and stood still in four others, according to a recent analysis of employment trends.
At Samsung Electronics, for instance, the number of employees at home had dropped by 825, or 1 percent of its total payroll, compared with the end of 2014. The world's largest smartphone maker increased the number of workers by 5,000 in 2013 and 3,500 in 2014, but the trend turned downward last year, the report said.
"The biggest reason for the reduced hiring was a worsening financial situation, as shown by the fall in sales over the past few years," said a Samsung Electronics executive. The company's turnover stood at 200.65 trillion won ($168.57 billion) last year, down 3 percent from 2014.
A private economist said Samsung Electronics' case is indicative of overall trends in the manufacturing sector.
"It is proof that new employment is falling across the board in Korea's flagship manufacturing industries," said Korea Economic Research Institute vice chairman Bae Sang-keun. "The actual scope of payroll cuts might have been far bigger if we consider the situation of the final quarter of last year, when a large number of workers retired due to the age limit or voluntarily."
Another reason for the "employment cliff" is most manufacturers' reluctance to build plants or expand existing ones. Kia Motors, for instance, cut its payroll by 43 workers last year compared with 2014. "Over the past decade or so, there has been almost no change in our total payroll except for some who were converted from temporary to permanent workers," a company official said.
This means sluggish employment in the auto industry for nearly two decades was due to the lack of plant construction or expansion. Hyundai Motor has built no factories since its last one in Asan, South Chungcheong Province, in 1998.
High wages are also to blame.
"At a time when global automakers are staging fierce cost-cutting competition, it will be difficult for Hyundai Motor, whose average labor cost of 97 million won ($81,500) exceeds Volkswagen's 90.62 million won, to increase employment," said Lee Hang-koo, senior fellow at Korea Institute for Industrial Economic and Trade (KIET).
Factory automation is also taking jobs. Steelmaker POSCO cut 489 employees last year. "We have trouble transferring employees whose jobs have become redundant because of automation," said a POSCO official. "We have managed to maintain the overall employment size thanks to the extension of the retirement age, from 56 to 58, from 2013, but its effects are about to disappear soon."
And the situation may become worse. Korea's three largest shipbuilders reduced their combined payroll by only 354 over the past year. If their backlog orders for offshore plants are fulfilled by next year, more jobs are sure to go.
Daewoo Shipbuilding and Marine Engineering, which registered a record 5.5 trillion won loss last year, plans to dismiss another 3,700 workers by 2019. "Even if the shipbuilding industry recovers, we will be unable to hire more employees because Chinese shipyards are rapidly chasing us through drastic restructuring," said a Samsung Heavy Industries executive.
The situation is little better in the shipping industry. Korea's two largest shipping lines, Hanjin and Hyundai, have been cutting their payrolls since the industry fell into a slump in 2011. Their combined number of employees stood at 3,658 in 2011 but fell 25 percent to 2,739 last year.
To expand employment, experts are calling for the focus to be on domestic services industries.
"It has been proved that the existing industrial structure of Korea focusing on large manufacturers and exporters can no longer increase jobs," said KIET president Kim Do-hoon. "The nation can increase employment only when it changes its focus to the services sector, which requires a lot more people."
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