[Factories Are Aging] Aging Three Times Faster Than Japan, the 'Oldest Country'

Average Age in Manufacturing Industry Rises by 6.6 Years Compared to 20 Years Ago
Japan, Facing Severe Aging, Sees Increase of 2.3 Years
Youth Proportion Halves to 16% of Total

[Asia Economy Reporters Kim Bo-kyung, Lee Jun-hyung] Programs encouraging youth employment sometimes become a source of false hope for small and medium-sized enterprises (SMEs). Park Jeong-woon (pseudonym), who runs a non-ferrous metal processing company in Siheung, Gyeonggi Province, utilizes the Tomorrow Filling Deduction, a program designed to encourage long-term employment among young workers. The Tomorrow Filling Deduction is a system where if a young person works at an SME for more than two years, the company and government help them accumulate a lump sum of money. The problem arises after two years. Young employees leave the company as soon as they receive the lump sum. Park said, "When young employees get used to the work, they leave the company, and then we have to train new employees repeatedly, which is very troubling."

◆Labor Shortage Compounded by the 52-Hour Workweek= The aging of the domestic manufacturing workforce has progressed about three times faster than in Japan, known as the "world's oldest country." According to the Korea Economic Research Institute, as of 2019, 28.4% of Japan's total population was aged 65 or older, the highest level worldwide. Japan's aging rate is 13.5 percentage points higher than South Korea's. However, over the past 20 years, the average age of manufacturing workers in South Korea increased by 6.6 years, while in Japan it rose by 2.3 years. In terms of increase, South Korea's rise is 2.9 times that of Japan.

The proportion of young workers in the total manufacturing workforce has halved over 20 years. As of 2019, the share of young workers (aged 15-29) in South Korea's manufacturing sector was 16%, down 16 percentage points from 32% in 1999. Japan also saw a decline in the youth proportion, but the drop was smaller at 6.4 percentage points. In Japan, the core economic age groups of 30s and 40s showed a 1.2 percentage point decrease in the 30s and a 3.7 percentage point increase in the 40s, resulting in a net 2.5 percentage point rise. In contrast, South Korea saw a 6.3 percentage point decrease in the 30s and a 3.6 percentage point increase in the 40s, resulting in a net 2.7 percentage point decline.

Along with job mismatches and aging production workers, the 52-hour workweek, Serious Accidents Punishment Act, and foreign labor shortages due to the COVID-19 pandemic are pressuring SMEs. The 52-hour workweek was applied this year to SMEs with 50 to 299 employees and will be extended to companies with fewer than 50 employees starting this July. When the 52-hour workweek is enforced, core manufacturing companies must shift from two shifts to three shifts. However, due to young and middle-aged workers avoiding employment and difficulties in securing foreign labor, companies are stuck. The CEO of Company A said, "Many SMEs in the core manufacturing industry operate factories on alternating shifts due to poor financial conditions," adding, "With difficulties in hiring both domestic and foreign workers, being bound by the 52-hour workweek law leaves business owners no choice but to become lawbreakers."

The aging of the manufacturing workforce is intensifying. According to the Small and Medium Business Research Institute, the average age of manufacturing workers in 2019 was 42.1 years, which is 6.6 years higher than 35.5 years in 1999, twenty years earlier. The average age of workers in small and medium-sized enterprises with fewer than 500 employees increased by 6.5 years over 20 years to 42.6 years, while the average age of workers in small businesses with 5 to 9 employees rose by 9.2 years during the same period to 45.4 years. The photo shows a factory scene in Guro-gu, Seoul.

◆Walking on Thin Ice with the Serious Accidents Punishment Act= Most production workers at SME Company A, which has about 20 employees, are either elderly or foreign workers. The company president said he is always concerned about the high risk of injury among older employees. Although they urgently hired workers to keep the factory running, he said he is always uneasy.

The Serious Accidents Punishment Act, which increases management's responsibility in the event of serious accidents such as worker deaths, will be enforced starting January next year. Business owners at SMEs feel significant pressure from this.

A survey conducted by the Korea Employers Federation (KEF) targeting major companies by industry found that companies pointed out the ambiguity and lack of clarity regarding the scope and application of the Serious Accidents Punishment Act. They requested the government to specify vague provisions in the enforcement decree and promptly prepare legal commentaries, manuals, guidelines, and guides. They also requested government policy support such as tax benefits for hiring safety and health professionals and costs for improving hazardous or aging facilities.

The issue of replacing foreign workers whose stay period has expired is also a concern. The CEO of Company A said, "We have five skilled foreign workers, but three must leave within a year," adding, "The three replacements will likely be elderly or foreign workers, but since the factory must keep running, we are just trying to put out the urgent fires."

Park also experienced difficulties operating his factory due to a manpower gap caused by the expiration of the stay period of a skilled worker from Sri Lanka. He said, "Foreign workers must return to their home country for three months after working in Korea for a certain period," adding, "Since each employee is precious and skilled workers are hard to replace with new hires, business owners inevitably worry a lot."

No Min-seon, head of the Future Strategy Research Group at the Korea Small Business Institute, said, "Since SMEs heavily depend on foreign workers, the potential business impact is significant," adding, "Efforts to replace foreign workers with domestic workers are ultimately the direction we must take."

This content was produced with the assistance of AI translation services.