Labor mobility to less lucrative sectors to weigh down Korea’s productivity

By Park Hyung-ki
  • Published : Nov 3, 2013 - 19:41
  • Updated : Nov 3, 2013 - 19:41
Korea’s economic competitiveness is expected to be severely affected by an increasing number of workers moving from high value-added industries to low value-added ones, analysts at the Bank of Korea warned.

Almost 53 percent of employees of high value-added sectors such as manufacturing and information technology moved into low value-added services industries over the last decade, according to a BOK report by a group of analysts.

The figure, which compares 2003 and 2013 data, increased from turnover of about 40 percent the decade before, it added.

More than 75 percent of those who switched to low value-added jobs stayed in those sectors, many working for or setting up motels or restaurants that offered lower entry barriers compared with high value-added industries.

This was far higher than 63 percent who stayed in manufacturing, BOK analysts noted, raising concerns that labor mobility in this direction would weigh down the country’s productivity, and therefore growth in the long term.

They said that Korea was going “backward” in terms of labor turnover. It is more common for an emerging economy maturing into a developed one to see its laborers to move into high tech or innovative sectors from low-grade industries.

The rise in Korea’s labor turnover came as an increasing number of people who retired or were laid off from in high value-added sectors sought to continue working to maintain basic living standards.

The current labor trend in Korea could further widen the income gap, and increase social inequality and productivity imbalances unless the country boosts job training for such people to help them get back into high tech sectors or helps raise productivity in low value-added sectors through innovation, the BOK report said.

By Park Hyong-ki (