SEOUL, SOUTH KOREA: Employment in Korea's manufacturing sector is declining by the year, as the trend of jobless growth seeps deeper into the economy due to an advancing market and increasing number of companies expanding overseas investments, according to a state-run think tank.

This phenomenon has been most apparent in the manufacturing sector, the pillar of the nation's economy, the Korea Institute for Industrial Economics and Trade said in a report. However, the productivity is rising.

In 1993, it took an average of 11.08 workers to produce 1 billion won worth of goods, but the figure dropped more than two-fold to 3.92 people by 2005, according to the study on the impact of macroeconomics on industries released Tuesday (12 Feb).

In 2006, the figure dropped further to 3.66 workers, showing an overall decline of 67% since 1993.

Asia's fourth-largest economy has been struggling with uncertain job prospects as manufacturing companies seek to build factories in markets with cheaper labour like China, India, and Viet Nam. The lack of government incentives and high taxes have also prompted companies to look offshore or to hold back investments at home.

By manufacturers, according to the report, information-technology firms, such as electronics parts makers, and audio and telecommunications equipment makers, saw the steepest decline to 1.69 workers in 2006, down 85% from the 11.31 recorded in 1993. Computer and office equipment manufacturers suffered the biggest drop, of 2.45 workers, an 86% plunge from an average of 16.96 recorded 13 years ago.

However, the metal industry, most representative of the smokestack industry, felt the least impact, as it employed an average of 11.25 workers in 2006, down 20% from 13.99 workers registered in 1993.

The service industry also experienced the smallest impact compared to manufacturers, as it employed 17.56 people per firm on average, down 27% from 23.94 during the same period.

Machinery equipment rental companies and supplies rental firms hired more people, with employees averaging 29.9, up 19% from 24.55. The property market also saw a rise, with 5.42 workers per firm, a 40% jump from 3.87.

The KIET report attributed the growth to development of the information-technology industry and the advance of technologies. The think tank projects the gap in employment between the manufacturing and service industries to widen because of the accelerating pace of job cuts by manufacturing firms.

Between 1995 and 2006, the labour productivity rate of manufacturing companies grew an average of 8.8% annually, while the service industry in general recorded an average of 1.8%. Within the service sector, only telecommunications firms saw a higher increase, with 11.8%.

"The employment rate in the manufacturing sector has been falling rapidly since the 1990s and into the following decade," the KIET report stated. "On the other hand, jobs are growing in the service sector, while our productivity is declining. This shows a different pattern from advanced economies where job growth is accompanied by productivity growth." (By YOO SOH-JUNG/ The Korea Herald/ ANN)