[Initial Insight] 'K-Manufacturing' Facing the Population Cliff

This is a story about a certain domestic shipbuilding company. Among the approximately 4,000 employees working in office and technical positions, those subject to the wage peak system?employees aged 55 to under 60?account for well over 10%. This means that out of every 10 people in a department, 1 or 2 are approaching retirement in a few years. It is also said that even after reaching retirement age, many do not leave the workplace easily, thanks to their healthy physical condition and the belief that "they can still work." As time goes by, the proportion of elderly workers inevitably continues to increase.

Shipbuilders, buoyed by a winning streak in orders, have secured work for the next three to four years, putting an end to a long period of stagnation. Although it is time to fully enjoy the long-awaited boom, the overlapping waves of labor shortages and aging workforce mean there is no mood to pop champagne bottles.

Domestic shipyards are already unable to operate without foreign workers. It is estimated that by the third quarter of last year, the total production workforce in the shipbuilding industry was about 14,000, of which approximately 12,000 were foreigners. The shipbuilding industry expects the number of foreign workers at shipyards to exceed 20,000 this year. The situation is similar in other industries such as steel, refining, and petrochemicals. A steel industry official lamented, "The number of retirees has sharply increased in recent years," adding, "We are hiring new employees, but it is insufficient to replace those retiring."

The reality of Korea's manufacturing industry facing aging is bleak. While the imbalance between job seekers and jobs due to the aversion to '3D' (difficult, dangerous, dirty) jobs persists, workers are aging. According to the Employment Status Survey by employment type compiled by the Ministry of Employment and Labor, the average age of wage workers in Korea was 43.8 years in 2022. This is a significant increase of 3 years compared to 40.5 years in 2013, a decade earlier.

As the number of elderly workers increases, the risk of industrial accidents also rises. According to research by the Korea Employment Information Service, about 130,000 industrial accident victims and approximately 2,000 deaths occurred in 2022. Among workers aged 60 and over, the number of accident victims was 45,332 (34.8%), and deaths numbered 1,089 (49.0%), showing overwhelmingly higher accident and death rates compared to other age groups. In an atmosphere where legal regulations such as the Serious Accident Punishment Act are being strengthened to prevent industrial accidents, an aging workforce could impose unexpected burdens on companies.

Which company would refuse younger workers to replace elderly laborers? However, finding young workers is more difficult than "picking stars from the sky." According to employment trends released by Statistics Korea last month, the number of employed persons under 29 has decreased year-on-year for 17 consecutive months since November 2022. The number of employed persons in their 40s has also declined for 21 consecutive months since July 2022.

The problem is that the number of people entering economic activity in the near future is itself decreasing. The number of students in Korea's kindergartens, elementary, middle, and high schools fell below 10 million in the 1990s and stood at only 5.78 million in 2023. When these students reach employment age, it is clear that companies will face a severe labor shortage that is hard to imagine now. Will increasing immigrants then be a viable solution?

Companies are turning their plans to overcome labor shortages through advanced manufacturing technologies into reality. Various attempts are underway to apply automation, robots, and artificial intelligence (AI) to manufacturing sites. Microsoft founder Bill Gates expressed optimism, saying, "A world will come where AI and machines make all food and materials, and people won’t need to work more than five days a week to earn a living," but this still sounds like a distant prospect to most.

It is no longer just about simply increasing the population; the golden time to earnestly consider and prepare measures for the sustainability of the manufacturing industry, which forms the backbone of the national economy in the era of population cliff, is running out.