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Labor Cost Portion of Sales Among Export Manufacturers

The ratio of labor costs to revenue at South Korea’s top 500 companies has reached 5.9%, a new analysis shows. According to figures accessed on Aug. 16 at CEO Score, a website that assesses companies’ business performance, labor costs (defined as total annual wages) at South Korea’s top 500 companies amounted to a total of 94.26 trillion (about US $94 billion) won last year, forming a ratio of 5.9% relative to those companies’ revenue of 1,607.65 trillion won (about US $1.6 trillion).

The labor cost ratio is 0.5 percentage points higher than it was in 2014, two years prior to the survey being conducted. Sales have declined 1.9% over the same period, while the number of workers and labor costs increased by 0.4% and 6.4%, respectively.

In South Korea’s five main export industries, the ratio of labor costs to sales was highest (10.2%) in automobiles and parts. The labor cost ratio at South Korea’s three major

automakers was 13.0%, more than twice the average across all companies.

Other industries in which the labor cost ratio exceeded the average were IT, electricity and electronics (8.8%) and shipbuilding, machines and equipment (8.5%). The labor cost ratio was below average in steel (5.8%) and petrochemicals (3.4%).

An analysis of 111 companies that belong to South Korea’s five main export industries found that the labor cost ratio was highest at LG Siltron, at 18.9%. Other companies where the ratio topped 15% were Nexen Tire (17.7%), Samsung SDI (17.1%), Samsung Electro-Mechanics (16.7%), Hanwha Techwin (15.6%), SL (15.5%) and the Hyundai Motor Company (15.2%).

In contrast, companies in the petrochemical industry had a labor cost ratio in the lower single digits. SK Energy, SK Global Chemical and Hyundai Oilbank had a ratio of 1.4%, while S-Oil was at 2.1% and Hanwha Total was at 2.2%.

Among the 111 companies, the labor cost ratio had increased at 84 companies (75.7% of the total) and decreased at 22 companies (19.8%). The ratio remained the same at the other five companies.

By Kwack Jung-soo, Business Correspondent

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