Big Businesses Begin Laying off Workers

Korea's fat cats will be increasingly minded to lay off personnel as the coronavirus epidemic exacerbates the sluggish overall economy.

Refiner S-Oil, the most sought-after employers due to its high salaries and perks, is considering its first key layoffs since 1976. The common annual wage at S-Oil is an astounding W137 million, with the average duration of work of 16 years, even more than Samsung Electronics' W119 million and 11.6 years (US$1=W1,232).

But the petroleum firm has been hit hard by declining margins and inventory valuation losses as oil and petroleum merchandise prices have plummeted as a result of pandemic.

Hyundai Oilbank, another Korean refiner, recently went into crisis mode with management accepting a 20-percent pay cut. And SK Development, which is expected to suffer greater than a W200 billion reduction in the primary quarter of this yr, slashed the operating fee of its factories by 15 percent this month due to declining demand. 

In the airline industry, there already are more than 10,000 employees on unpaid leave.

Korea's top conglomerates all complain that they are suffering. Samsung Heavy Sectors has started choosing applications for voluntary pension. Hyundai Steel and Hyundai Rotem, making railway cars, are doing the same, as can be LG Display.

Lotte, which announced ideas to close down 200 money-losing stores, is expected to lay off at least 10,000 employees.

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 suffer from chronic low growth because they lag behind global rivals in the fourth professional revolution. The minimum-wage hike and 52-hour cap on the working week have made conditions even more difficult.

Some 42,000 persons work for Korea's nine bloated airlines, but a quarter of them have already been placed on unpaid leave. Travelling demand in Korea shrank substantially last year because of a boycott of Japan, and the coronavirus epidemic has got hurt demand a lot more, grounding 90 percent of international flights.

Korean Air has up to now only put 500 personnel on unpaid leave, but at troubled Asiana Airlines, the quantity is closer to 10,000 employees on unpaid keep for 10 days at the same time. The duration will increase to 15 times in April.

Shipbuilders are also struggling again. Three best Korean shipbuilders already laid off 6,000 staff in 2016 amid an acute industry-huge slump, and today Daewoo Shipbuilding and Marine Engineering, which Hyundai Major Industries is trying to take over, and Doosan Heavy Sectors are spending applications for voluntary pension.

Drastic measures may be essential to rescue Korean businesses. But the worst-hit are tiny and mid-sized companies, that could have problems with a chain of bankruptcies, possibly leading to the entire financial ecosystem in Korea to collapse.