Last Year`s Commercial Banks Labor Cost, Up by 42%

Commercial banks` average labor cost rose by 42% compared to last year.

On August 15, the Bank of Korea announced that last year`s balance sheets showed that the aggregate labor cost of the banking sector (commercial banks, local banks, special purpose banks) for alt year has increased by 27.1% at 921.4 billion won, compared to 4.3197 trillion won in 2001.

In particular, the labor cost of commercial banks, including Kookmin Bank, Hana Bank and Woori Bank, went up on average 41.8%, totaling 2.9852 trillion won, pulling the banks` overall average labor cost upward.

Meanwhile, local banks’ labor costs were raised by 18.3%, totaling 318.5 billion won, and special purpose banks, such as Industrial Bank, paid a total of 116 billion won, recording a drop of 8.1 billion won compared to the previous year.

The figures show that bankers, including 89,159 regular workers and 28,412 irregular workers, earned 37 million won last year on average. The number increased by 8 million won compared to year 2001.

Commercial banks` average labor costs increased from 26 million won in 2001 to 37 million won last year and local banks average labor costs rose from 25 million won to 29 million won, but special purpose banks` costs remained unchanged at 38 million won.

An official of the BOK explained that, “recording the largest-in-history profits last year, the commercial banks gave a raise in salaries that had been frozen since the foreign exchange crisis or gave out bonuses, and the banks` payments for retirement grants also contributed to ballooning the total sum.”

The current rise in labor costs is viewed to weigh as a burden for this year, as banks` performances are expected to deteriorate.

8 commercial banks, including Kookmin Bank, are faced with difficulties as net profits for the first half of the year plummeted by almost 90% compared to the same period of last year, due to delinquent household debts, the SK Global scandal and loss provisioning.

Joong-Hyun Park sanjuck@donga.com