Total Factor Productivity Growth Slowing Down
The Bank of Korea announced on April 9 that the manufacturing sector of South Korea posted an average annual labor productivity growth of 2.2 percent for the period of 2011 to 2015 whereas the average annual labor productivity growth had been 7.9 percent in 2001 to 2007.
“This is attributable to a decline in total factor productivity growth, which was caused by the shortage of innovative companies and inefficient labor and resource distribution,” the central bank explained. The total factor productivity is a productivity indicator covering various factors such as labor-management relations, management frameworks, and laws and systems as well as single elements such as labor and capital.
South Korea’s labor productivity growth declined very fast in its major export industries, including semiconductor, display and mobile phone. Specifically, that of the electronic component industry including semiconductor and display dropped from 13 percent to 4.9 percent and that of the broadcasting and communications equipment industry fell from 22.1 percent to 14.2 percent.
Korea outpaced the other OECD member countries in terms of the rate of decline in manufacturing labor productivity growth. For example, Korear’s figure fell 5.7 percent between the two periods while the latter’s average edged down by 2 percent. Besides, the South Korean manufacturing sector’s hourly labor productivity stood at US$51 whereas those of the United States and Germany amounted to US$87 and US$81, respectively.