The Korea Herald is publishing a series of features and interviews on South Korea’s business environment for foreign companies and investors. This is the seventh installment. -- Ed.


A hardworking mentality has been without doubt the key mantra of South Korea in its rapid industrialization and economic advancements after the Korean War (1950-53).

Now the 11th-largest and fourth-biggest economy in the world and Asia respectively, the country is leading in industries ranging from conventional manufacturing to new technologies related to chips, displays, networks and electronics. 

Foreign companies that have joined the expanding economy here agreed that hard work remains the top strength of the local work force in their daily operations. According to a survey of 3,410 foreign companies released in March by the Korea Trade-Investment Promotion Agency, 71 percent of the respondents said Korean workers’ strength is that they are hardworking and have a sense of responsibility.

But the days of relying solely on such an approach may be gone as the rapidly changing values and technologies of today require something different and more creative, foreign executives and local experts point out.

Shy Koreans

“Koreans are hardworking but they are too shy. They barely ask questions in meetings. It may be due to their fear of speaking English in front of others but also their lack of skills to express their ideas,” an executive of Finnish tech firm Nokia told The Korea Herald.

Many foreign CEOs and executives doing business here shared his view, saying it is difficult to understand what Koreans really think. The inability to communicate clearly and effectively among workers also leads to a lack of creativity in companies.

The aforementioned KOTRA report said the biggest weakness of Korean workers is their lack of creativity and a “challenging” spirit.

“Foreigners, especially those from western nations, are accustomed to freely expressing their opinions even to their bosses, but Koreans are not familiar with such a practice,” said Shin In-an, CEO of Workin, who has been offering consultation on Korea’s work culture to German companies entering the Korean market since 2001.

Rather than direct dialogue, Shin said Koreans rely more on facial expressions or gestures in expressing their thoughts, making it tricky for foreign executives to figure out what they are trying to express.

This lack of communication skills is rooted in their family and school education, according to Shin Ho-chang, a professor at Sogang University’s communication college.

“Koreans do not learn how to effectively communicate with others from their teachers or parents. We only learn to be very careful when talking to older people or seniors at work,” the professor said.

To date, poor communication skills have not mattered significantly at work in Korea, as the traditional manufacturing sectors require the efficiency of a top-down system, where the hours of work put in equals output.

“Asking questions or seeking ideas were not necessary. They just needed to work harder and harder to meet the deadline set by the management -- whether they are too harsh or not,” said Park Ju-gun, head of corporate analysis firm CEO Score.

However, as Korea should move from being a fast-follower to a first-mover in future creative industries -- including self-driving cars, drones, artificial intelligence, robots and big data -- having only a hard-working mentality will no longer be a powerful tool, the experts agreed.

“It is time for Koreans to change their work mentality toward more creative thinking and ideas through open discussion and communication,” Park said.

Rigid labor environment

In terms of the labor market structure, foreigners note that Korea lacks flexibility.

According to the KOTRA survey, the biggest challenge for foreign companies in Korea’s labor environment was high wages. 

A survey released by the European Chamber of Commerce in Korea in February showed that 73 percent of executives in foreign firms said raises in wages were either “the biggest problem” or a “fairly big problem.”

“This doesn’t simply mean that wages are high. It means wages are high compared to productivity. Foreign companies think it is not fair to give the same high salaries even to employees whose productivity is lower (than others),” said Chung Jo-won, chief of the Korea Economic Research Institute’s job creation team.

While many employers in western nations use performance-related pay, Korean companies use seniority-based pay systems, in which the primary basis for pay increases is the employee’s tenure.

Around half of the nation’s top 500 companies use seniority-based pay systems, according to the Korea Economic Research Institute. For production workers, around 70 percent of them are paid based on seniority. Korea’s labor productivity ranked 17th among 22 member nations of the Organization for Economic Cooperation and Development, according to an OECD report released Sunday.

The progressive Moon Jae-in administration has been making bold moves in terms of the labor market by reducing work hours to 52 hours from July this year, while vowing to raise the minimum wage to 10,000 won ($9) per hour by 2020.

While the initiatives are generally welcomed in concept for helping improve the working conditions of overworked laborers here, the unilateral aspect of the measures could collide with the realities of different industries, some say. 

Sung Tae-yoon, a professor of economics at Yonsei University, said the policies that fail to stay in sync with the reality could worsen the labor market, despite the ”good intentions.”

“While shortened work hours could pull up the productivity in the short run, a unilateral application overlooking the work type or method could act as a restriction to inducing investments or added values of the companies,” Sung explained.

And such policy could only add onto the rigidity of the market, he added.

A chief of the local arm of a US manufacturing firm, who asked for anonymity, said, “If making profits will become more difficult here due to the government’s ‘business unfriendly’ policies for minimum wage and working hours, labor-intensive companies like us may have to seek other destinations in Asia.”

By Shin Ji-hye (shinjh@heraldcorp.com)