Base Undermined Rapidly
A harsh restructuring is causing the shipbuilding industry's skilled workers to leave the shipbuilding industry in drove. According to the Korea Offshore and Shipbuilding Association, the number of shipbuilding workers exceeding 200,000 in 2015 was estimated to be 130,000 last year and will be less than 100,000 this year.
Technicians who have worked for more than 10 years despite significant human resources reduction are also leaving shipyards. In 2015, the number of technicians who had stood 170,000 fell to below 110,000 in the first half of last year and four out of ten have not returned to their companies.
The problem is that the base of the Korean shipbuilding industry is being rapidly undermined as skilled human resources have left shipyards in the last three years. In the shipbuilding industry, engineer in the design and R&D sector should have more than 10 years of experience, those in piping, 5 to 10 years of experience, those in mounting, 3 to 5 years of experience and those in welding, 2 to 3 years of experience to be skilled human resources. It is also due to the recent improvement of the industry that "100,000 people are marginalized" in terms of job shift.
UK shipbuilding and marine analysis agency Clarkson Research estimates that global shipbuilding orders jumped 78.2% year on year to 23.22 million CGTs last year, are expected to hit 27.80 CGTs this year and 34.70 million CGTs by 2020. Analysis says that the shipbuilding market is in the early stage of an improvement in trade expansion thanks to a global economic recovery, rising oil prices and aged ship replacements. Korea's market share (based on order volume) in the world shipbuilding market was 27.7% last year, that of China, 39.5% and that of Japan, 8.6%. It is pointed out that if the number of shipbuilding workers declines by 40,000 a year as it does now, the Korean shipbuilding industry will follow the footsteps of the Japanese shipbuilding industry as the Korean shipbuilding industry will not have enough workers to build ships even though it will receive more orders thanks to a market recovery.
In the 1970s, the Japanese shipbuilding industry has about 160,000 workers and accounted for 50% of the world shipbuilding market. But two drastic restructurings cut its workforce to 50,000. Shipbuilding departments of universities and colleges across Japan were shut down and the number of core personnel dropped, eventually losing the shipbuilding market to Korea and China. The quality of employment and wages also shrank. At Imabari Shipyard, which recently made an improvement to sales performances, 90% of the workforce are subcontracted workers. This is because the shipyard pruned labor costs to compete with China.
The Korean shipbuilding industry believes that a restructuring of the industry is at a crossroads whether to follow the Japanese model or the Korean one. In the 1990s, subcontracted workers accounted for 20% of a total workforce at a shipyard in Korea. But now the percentage is at the 70% level. In particular, dangerous work such as work on high scaffolds and painting work handling hazardous materials is done by subcontractors and workers in permanent positions take on relatively safe work. However, workers in permanent positions are enjoying higher wages and stronger job security and their salaries increase over time.
This reason has been leading the management of a large shipyard in Korea is negotiating with the labor about introducing a duty-based wage system that differentiates wages according to work risk and difficulty like Germany. The negotiation aims to give a boost to the company’s competitiveness by reducing total labor cost. Instead of giving skilled personnel permanent positions, they will cut total labor cost by persuading high paid workers in permanent positions to make concessions. "If the proportion of temporary workers exceeds a certain level, it will be difficult to accumulate excellent skills and productivity will slide," said a researcher at a government-run institute for policy studies who demanded anonymity. "It is necessary to correct the unlevel playing field through labor-management negotiations."