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Productivity Increase Lower Than Wage Hike

Posted July. 25, 2004 22:03,   

한국어

Workdays lost due to strikes and lockouts were 100 times higher than those of Japan and Sweden.

The Korean economy is also aging fast due to wage hikes that surpass productivity increases and the subsequent fall in return on investment (ROI). This phenomenon of low growth rate was commonly seen in advanced countries.

Workdays lost per 1,000 workers from the year 2000 to 2002 stood at 111 days, much higher than Japan and Sweden, which recorded only a day loss each, the Institute for Monetary and Economic Research of the Bank of Korea (BOK) announced in its report on July 25.

Korea’s lost workdays were 37 times higher than German’s three days, three times higher than Britain’s 32 days, and two times higher than America’s 56 days.

During the same period, the Korean workers’ accession rate to labor unions was 11.4 percent, which was lower than developed countries, such as the U.S.’s 12.3 percent and Japan’s 21.5 percent. But labor strikes were not diminished due to militant unions in major companies, the BOK analyzed.

The average real income increase from the year 2000 to 2003 was 0.1 percentage point higher than the productivity increase, which shows that the productivity increase is not catching up with wage hikes. Productivity increase in the 1990s was 2.5 percentage points higher than the real income increase.

The return on assets (ROA) of Korea’s manufacturing industry in the same period was three percent, much lower than that of developed countries in the 1970s when it had a per capita income of 10,000 dollars, the report said. In the 1970s, the ROA of the U.S., Germany and Japan stood at 10.1, 5.4, and 4.4 percent respectively.

The employment rate of women college graduates aged 25 to 54 was 55 percent as of 2000, the lowest among 28 member countries of the Organization for Economic Cooperation and Development (OECD). Korea’s birthrate fell to 1.2 as of 2002, far lower than 2.1, which is needed to maintain the current population. Many concerns are arising that the lower birthrate can hinder quantitative economic growth.

“Korea is facing problems like high wages, falling ROI and falling birthrates faster than developed countries,” said Im Cheol-Jae, a manager at the Institute. “To address all this, we need institutional reforms aimed at improving labor market flexibility, investment, and productivity as other developed countries have.”

Return on assets is the ratio of ordinary income to total assets, which shows how efficiently a company uses its assets for business performance.



Joong-Hyun Park sanjuck@donga.com