South Korea’s Manufacturing Competitiveness on the Decline

Growth in South Korea’s labor productivity per worker in the manufacturing sector dropped from 7 percent to 2.8 percent a year between the periods preceding and following the global financial crisis of 2009. The latter figure is lower than China’s 8.6 percent, Japan’s 4.1 percent, Germany’s 4 percent and France’s 2.9 percent as well as 41 surveyed countries’ average 3.5 percent. During those years, South Korea’s average annual increase in unit labor cost in the same sector rose from 0.8 percent to 2.2 percent, going against the global trend.

The Korea Economic Research Institute announced on Feb. 24 that the 41 countries’ labor productivity per worker in the manufacturing sector rose 3.4 percent a year from 2002 to 2009 and 3.5 percent a year from 2010 to 2017 according to data from The Conference Board, Inc., which is an American non-profit business membership and research group organization.

On the contrary, South Korea’s labor productivity per worker in the manufacturing sector rose 7 percent a year from 2002 to 2009 and 2.8 percent a year from 2010 to 2017 and the country came in fifth behind China, Poland, Slovakia and Rumania and came in 28th in the respective periods in terms of annual labor productivity growth.

When it comes to the unit labor cost in the manufacturing sector, the 41 countries’ average annual increase was 6 percent from 2002 to 2009 and negative 1.7 percent from 2010 to 2017 and South Korea’s was 0.8 percent and 2.2 percent in the respective periods. This means the competitiveness of South Korea’s manufacturing sector declined. In the latter period, only China’s and India’s unit labor costs in the sector increased more rapidly than South Korea’s.
 

From 2009 to 2017, China’s labor productivity per worker jumped 93.1 percent, followed by Singapore’s 71.7 percent, Taiwan’s 38.7 percent and Japan’s 38.1 percent, while South Korea’s rose 24.4 percent. During the same period, China’s and South Korea’s unit labor costs increased respectively by 39.1 percent and 19.3 percent whereas the rate of increase stood at 1.5 percent in Taiwan and the cost decreased by 16 percent in Singapore and 33.4 percent in Japan.