March 26, 2020 12:56
Korea's fat cats are increasingly minded to lay off workers as the coronavirus epidemic exacerbates the sluggish economy.
Refiner S-Oil, one of the most sought-after employers due to its high salaries and perks, is considering its first major layoffs since 1976. The average annual salary at S-Oil is a staggering W137 million, with an average duration of employment of 16 years, even more than Samsung Electronics' W119 million and 11.6 years (US$1=W1,232).
But the petroleum company has been hit hard by declining margins and inventory valuation losses as oil and petroleum product prices have plummeted due to the pandemic.
Hyundai Oilbank, another Korean refiner, recently went into crisis mode with management accepting a 20-percent pay cut. And SK Innovation, which is expected to suffer more than a W200 billion loss in the first quarter of this year, slashed the operating rate of its factories by 15 percent this month due to declining demand.
In the airline industry, there are already more than 10,000 workers on unpaid leave.
Korea's top conglomerates all complain that they are suffering. Samsung Heavy Industries has started taking applications for voluntary retirement. Hyundai Steel and Hyundai Rotem, which makes railway cars, are doing the same, as is LG Display.
Lotte, which announced plans to close down 200 money-losing stores, is expected to lay off at least 10,000 workers.
The problem is that the epidemic is just a latest blow to the country's economy, which has been losing vitality and growth engines while Chinese rivals catch up quickly. Korean companies are suffering from chronic low growth as they lag behind global rivals in the fourth industrial revolution. The minimum-wage hike and 52-hour cap on the working week have made conditions even more difficult.
Some 42,000 people work for Korea's nine bloated airlines, but a quarter of them have been put on unpaid leave. Travel demand in Korea shrank drastically last year due to a boycott of Japan, and the coronavirus epidemic has hurt demand even more, grounding 90 percent of international flights.
Korean Air has so far only put 500 workers on unpaid leave, but at troubled Asiana Airlines, the number is closer to 10,000 workers on unpaid leave for 10 days at a time. The duration will increase to 15 days in April.
Shipbuilders are also struggling again. Three top Korean shipbuilders already laid off 6,000 workers in 2016 amid an acute industry-wide slump, and now Daewoo Shipbuilding and Marine Engineering, which Hyundai Heavy Industries is trying to take over, and Doosan Heavy Industries are taking applications for voluntary retirement.
Drastic measures may be necessary to rescue Korean businesses. But the worst-hit are small and mid-sized companies, which could suffer from a chain of bankruptcies, possibly causing the entire economic ecosystem in Korea to collapse.
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