[Editorial] Higher Productivity Equals Advanced Country

The productivity of Korean workers per hour ranked 26th out of 29 OECD member nations in 2006 at 20.40 U.S. dollars, a mere 41 percent of that of the sixth-ranked United States. Labor productivity is calculated by dividing gross domestic product by the number of hours spent on labor by the entire workforce. Therefore, the statistic is determined by worker skills, production efficiency, level of technological development and capital. This means a country can join the ranks of advanced nations when workplaces become efficient in all aspects.

Boosting productivity requires slashing the number of work hours above all else. The average Korean worker puts in 2,360 hours a year, 700 hours above the G7 average. Compared to the year when other countries achieved per capita income of 20,000 dollars, Korea still had its workers clock in 558 hours more. As illustrated by manufacturing’s relatively high overtime rate of 50 percent, Korea has a highly inflexible labor market due to excessive overtime and protection of regular workers. Consequently, employers would rather overwork existing staff than hiring new employees to cut costs. Working overtime might have worked miracles in the past when the Korean economy began to expand, but it is hampering productivity and competitiveness at a time when creativity means everything.

Instead of obsessing over wage hikes, unions should cooperate with employers in reducing working hours per person. This can be done by revising the shift system that forces long hours of work at once, something which can raise productivity and competitiveness. Takeshi Inagami, the head of Japan’s Labor Policy Research and Training Organization who recently visited Korea, said the key to boosting productivity in the long run is to form cooperative labor-management relations. In other words, Korea cannot tackle low productivity and become an advanced economy without removing confrontational labor-management relations and the outdated practice of “strike first, negotiate later.”

Korea should follow the example of Japan, which has launched major reforms to enhance productivity since May last year after coming in last among G7 nations in the area for 11 consecutive years. As part of the program, Tokyo will nurture the corporate service sector, including accounting and finance, encourage consolidation of companies through deregulation and privatization, and improve its human resource development. For a country with lower productivity in its service sector than Japan, Korea cannot afford to sit idly on its hands anymore.