» People without jobs line up to attend a presentation on the unemployment insurance system organized by the Labor Ministry’s regional office for the city of Seoul at an office building in Jangkyo-dong, Jung-gu.

　It has emerged that Korea is the only OECD nation where unit labor costs have dropped since the full-scale recession emerging from last September’s financial crisis. The unit labor costs refers to the personnel costs that go into producing one unit of product. Korea’s drop in unit labor cost means the drop in wages is greater than the retreat in productivity, and shows that compared to other countries, employers are making considerable use of wage cuts as a response to the recession.

　If you look at the OECD’s report on unit labor costs in the first quarter released Monday, Korea’s first-quarter unit labor cost dropped 0.1% from same quarter last year, the only nation of the 27 members states examined where per unit labor cost dropped. The average unit labor increase of OECD member states was 3.5%. The G7 average was a 3.5% increase, while in Europe, the average was 5.7%. By nation, Luxembourg’s unit labor cost increase was the highest at 8.1%, followed by Finland (8.0%), Italy (6.0%) and Greece (5.9%). Japan’s increased by 4.0%, the United States by 2.8% and Sweden by 1.7%.

　Unit labor cost increases if wages increase faster than labor productivity. If the cost increases too quickly, inflation could follow, so it is also uses as a yardstick for inflationary pressure. Yet in Korea’s case, given how it was difficult to improve labor productivity after the global financial crisis, it is believed that wages have dropped in opposition to global trends, leading to a reduction in unit labor costs.

　If you look at the change in Korea’s unit labor costs from the previous quarter, it was -0.5% in the third quarter last year, 0.4% in the fourth quarter and 1.0% in the first quarter of this year, marking plus numbers from the fourth quarter. The was the same as the OECD average unit labor cost change in the first quarter (1.0%).

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