Small and mid-sized companies are laying off workers ahead of another 10.9-percent hike in the minimum wage in January to stay afloat.
According to the Korea Employment Information Service, a total of 497,314 workers were laid off by small and mid-sized companies and applied for unemployment support in the third quarter of this year, up a whopping 37,710 compared to the same period of 2017.
This was the biggest rate of increase for the third quarter since the government started tallying statistics in 2010. Over the same period, 110,000 workers were laid off by big businesses, up 14 percent. That means the government has handed out W5.5 trillion in unemployment support in the first 10 months of this year, already surpassing last year's total of W5.02 trillion (US$1=W1,130).
The layoffs are likely to increase as Korea enters a full-fledged recession. According to Statistics Korea on Sunday, the average factory operation rate in manufacturing in the first nine months of this year stood at just 72.8 percent, the lowest since the height of the Asian financial crisis in 1998, when the rate fell to 66.8 percent.
Global credit-rating firm Moody's last week forecast Korea's economy will grow just 2.5 percent this year, compared to the government's estimate of 2.9 percent, and 2.3 percent in 2019.
Jung Myung-ho of the Gyeonggi Textile Industries Association said, "The automotive and shipbuilding industries are already in a slump, and rising labor costs are prompting all manufacturing companies to lay off workers."
The situation is no different at big businesses and financial institutions. LG Display launched its first voluntary retirement program, and 1,500 workers applied. Daewoo Engineering and Construction conducted voluntary layoffs in July and September of this year, while Mirae Asset Life Insurance received applications from 118 workers for voluntary retirement. KB Insurance recently asked its labor union to consider a voluntary retirement program.
Workers who keep their jobs are under increasing stress. One automotive parts maker in North Jeolla Province recently laid off 70 workers, leaving only a bare-bones staff. The head of the company said, "Due to the staff cuts, one worker is now handling the duties of two or three." One 48-year-old owner of a handbag manufacturer in Seoul said, "Workers in major conglomerates may be able to enjoy their evenings after working no more than 52 hours a week, but people in small and mid-sized companies can't even take their holidays. If one worker takes a day off, others have to make up for the gap and work night shifts."
A study by the Korea Federation of SMEs shows that 82.9 percent of small and mid-sized businesses have no plans to hire workers in the second half.
Lee Jae-won at the federation said, "We will see a growing number of small and mid-sized companies scrap plans to hire new workers next year and lay off staff, and young workers and women will suffer the brunt."
Workers in a furniture company load shipments onto a truck in Gimpo, Gyeonggi Province on Thursday.