Red Alert on South Korean Economy

The latest Asian edition of Time Magazine warned that a series of strikes that have plagued the nation since President Roh Moo-hyun`s inauguration may be just enough to strike its economy to death.

The article, under the title of `Striking To Death?` noted that “although summer is traditionally strike season, disputes have been even more extraordinarily frequent and militant this year.”

Walkouts by metal workers, rail workers, teachers, truckers and bankers have cost the world`s 12th-largest economy billions of dollars, and in July South Korea registered a 3.9% drop in economic output blamed chiefly on stoppages at auto companies Hyundai Motors and Kia Motors.

“Salary increases in the manufacturing sector outpaced productivity improvements by nearly 4% last year. The gap is expected to be closer to 10% this year. It`s now one of the few industrialized countries in which wage increases are outstripping productivity growth,” Time noted.

Faced with rising wages and Draconian labor laws that make the companies hard to sack workers, foreign and domestic investors are starting to shift their investments to China where wages are up to 20 times lower than South Korea and strikes are rare, Time noted.

“Korea is losing its competitive edge, and unions are making things worse," a management consultant at Bain & Co. was quoted as saying in the article. In addition, the article analyzed that President Roh`s mishandling of strikes earlier in the year is the main cause of persistent labor-management strife. “I personally prefer the Dutch model. But officials at some European companies operating in South Korea point out that it will drive into surging labor costs," said Lee Joung Woo, the top policymaker at the Blue House. The CEO of Nestle said he tries to appeal to the Union saying “unite with management and fight the competition,” but this message only falls on deaf ears.

Jin Lee leej@donga.com