Only 19 Percent of Work Force Working In Manufacturing Sector

The ability of Korean manufacturing industries to absorb the work force is rapidly declining.

On March 27, the Korea Labor Institute (KLI) and the Korea Development Institute (KDI) co-issued research results on the matter. According to the results, the ratio between manufacturing workers and the employed is 19.0 percent. This number is much lower compared to Taiwan (27.1 percent), Korea’s economic rival, and lower still in comparison with Germany (20.6 percent) and Italy (21.7 percent), two advanced nations.

The ratio in Korea has dropped steeply, from 27.2 percent in 1990 to 23.6 percent in 1995, and then to 20.3 percent in 2000.

The current ratio is even below the ones of Japan, Germany, France and other major developed economies when they crossed the threshold of the per capita income of $20,000. For Japan, its ratio between manufacturing employees and the entire hired work force was 22.9 percent when it went over the per capita income mark of $20,000 in 1987. For Germany and France in 1990, the numbers were 28.4 percent and 19.2 percent, respectively.

Given the fact that Korea’s national per capita income stands at $14,162, economists believe that the ratio has dropped too quickly for its level of economic development.

Nevertheless, the relative importance of the value added by manufacturing industries in comparison with Korea’s GDP remained at 26.6 percent in 2003. This percentage indicates there has been little decrease in the importance of manufacturing compared to the 29.0 percent level in 1991.

Kim Yong-hyun, a KLI researcher, explained, “The importance of the manufacturing sector in terms of employment has plummeted as opposed to its importance in terms of value added. The reason is that those companies that survived the Asian financial crisis have streamlined themselves. Still, small or mid-sized businesses that usually absorb much of the work force have disappeared in the process. Since then, few companies have gone into business that can make up the employment hole.”

In a remote video lecture to undergraduates of Sungkyunkwan University on March 24, Samsung Electronics vice president Yoon Jong-yong made a similar observation, saying, “In the 80s and 90s, about 80,000 were absorbed into the ranks of the employed for every one percent of economic growth. Now, with automatization and higher productivity, that number has gone down to 35,000 for every one percent,” he said. “There is no sign of the unemployment problem being alleviated.”

Byong-Ki Lee eye@donga.com legman@donga.com