Friday, April 10, 2020
Service Industry Productivity Stays 46% That of Manufacturing, Lowest in OECD
Low Productivity
Service Industry Productivity Stays 46% That of Manufacturing, Lowest in OECD
  • By Cho Jin-young
  • December 15, 2014, 03:15
Share articles

The lobby of the Plaza Hotel in Seoul.
The lobby of the Plaza Hotel in Seoul.

 

A report shows that the labor productivity of service industry in Korea is merely 46 percent of that of the manufacturing sector, with productivity of intermediate industries such as the IT, finance, and insurance sector on the lowest spot among member states of the Organization of Economic Development (OECD).

According to the report “Policy Agenda for Service Industry to Gain New Growth Boost” released by the Korea Chamber of Commerce & Industry (KCCI) on Dec. 14, the labor productivity domestic service industry (added value divided by number of workers) in 2012 was 46.6 percent that of manufacturing, which was far behind the figures from countries strong in manufacturing such as Japan (83.0 percent) and Germany (72.8 percent).

In terms of the productivity of intermediate service industry, the gap becomes much bigger.

Korean IT sector productivity in comparison to manufacturing was 73.7 percent, compared to 164.7 percent of Japan and 105.0 percent of Germany. In case of finance and insurance, the domestic figure was 95.3 percent, while Japan's and Germany's numbers were 136.3 percent and 107.3 percent, respectively, marking higher productivity than manufacturing.

The results show that while Germany and Japan are known for their robust manufacturing foundation, their service industry productivity had already surpassed their manufacturing counterpart.

When it comes to the service industry productivity of the OECD member states, Korea’s labor productivity was one of the lowest among 25 countries researched, placing the IT industry at 22nd along with the finance and insurance industry at 21st. In terms of the business service sector, Korea ranked 17th among 24 countries.

KCCI stated in the report, “Considering that the Korean economy is highly dependent on the manufacturing industry, our service industry should be strengthened towards delivering synergistic effects in unison with manufacturing,” emphasizing, “It is important to foster service industries in sectors such as IT, finance, insurance, and business as they serve intermediate role for manufacturing.”

Korea Development Institute (KDI) professor Lee Si-Wook, a consultant for KCCI, said, “Leading economic powers such as the United States are showing confidence in restoring manufacturing competence, which is based on their competitive power in the intermediate service industry,” pointing out, “We are currently faced with boundaries in terms of boosting manufacturing competence because of low productivity in the intermediate goods industry.”

KCCI suggested a number of policy tasks that would serve to bolster the intermediate service industry, including service industry research & development (R&D), training of professional manpower, deregulation on professional services, and the remediation of a differentiating support system compared to manufacturing.