This study analyzes the trend in the productivity of the Korean manufacturing sector from 1966 to 1975, and identifies issues to be solved and improvements to be made.
Productivity is dependent not only on the accumulation of labor and capital, but also on the inclusion of the industrial structure, the process of capital accumulation, the changes in relative prices, and corporate concentration, among others. The Korean manufacturing sector has been growing at 25.5 percent or more per year since 1966. During this time, the weighted total productivity has risen by 2.1 percent to 2.6 percent, while the simple total productivity has risen by 3.0 percent to 3.7 percent. In other words, while the manufacturing sector continued to expand rapidly, only 85 percent of the labor and capital that has been invested so far has been put to productive use.
This is because Korea has focused almost exclusively on increasing the quantities of factors put into production instead of increasing productivity per se. This pattern is not limited to manufacturing, and can been found in many other industries as well. Another reason for the shortage of productivity can be found in low level capital productivity in Korea. Almost all of the manufacturing industries in Korea have been compelled to rely on foreign sources for most of their capital. Inefficiency or overlapping of investment is a root cause of the decline of total productivity. The heavy and chemical industries, by far the most important concerns of the Korean state, are capital-intensive industries, and Korean policymakers may increase the total productivity of the Korean manufacturing sector by concentrating their productivity enhancement measures in these industries first.
Manufacturing in Korea is concentrated in a few large corporations. The concentration of resources and productive activities, and the subsequent weakening of fair competition are also main reasons for the decline of productivity. As long as corporations raise their prices amid general inflationary trends, or engage in wasteful investment practices, the total productivity of the Korean manufacturing sector could remain the same or even worsen over the years. It is therefore crucial for corporations themselves to adopt measures to help increase their productivity.
While the total productivity of the manufacturing sector remains stagnant, that of export-oriented industries in Korea has seen a remarkable improvement, thanks to the modernization of production facilities and the development of new technologies. However, Productivity has remained the same in import-substituting and domestic-market-serving industries, reducing total manufacturing productivity.
The persistently low wage in the manufacturing sector has not helped improve the income distribution in Korea since 1966. While the actual level of income has been growing at approximately 10 percent per year, the return rate on capital has decreased by comparison, raising the price of labor relative to capital. This is yet another problem that must be solved in order to improve the productivity of the Korean manufacturing sector.
우리나라 제조업의 생산성분석, 1966-75(An analysis of the productivity of the Korean manufacturing sector)
|Series Title; No||연구보고서 / 제79-01권|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Manufacturing|
|Holding||KDI; KDI School|