Construction Companies' Layoff Storm... Monthly Average of 100,000 Involuntary Job Leavers Increased

Reduction of Regular Employees in Some Large Corporations

As the prolonged high interest rates bring a cold wave to the real estate market, large-scale workforce reductions are taking place mainly among small and medium-sized construction companies specializing in housing projects.

Recently, it has been confirmed that even some of the country's leading large construction companies have laid off around 100 employees this year, raising concerns that this could mark the beginning of a wave of layoffs in the industry next year.

Workers looking for construction jobs gather at the labor market near Namguro Station in Seoul. Photo by Kwak Minjae

According to the 'Business Workforce Survey Report' recently released by the Ministry of Employment and Labor, the average monthly number of job changers in the construction industry from January to September this year was 246,801. In particular, 94.5% of those who left in September were classified as involuntary job changers due to contract termination, restructuring, dismissal, or business deterioration. These are involuntary departures unrelated to the workers' intentions.

The industry is concerned about the increasing trend in the average monthly number of job changers. An increase in job changers indicates instability in the business conditions and management environment of companies. It can also be seen as a sign that construction companies are increasingly likely to join the ranks of workforce reductions through various methods.

The average monthly number of job changers, which was 179,959 in January this year, rose to 224,747 in March. It then surged to 289,830 in June and 303,171 in September. Due to the nature of the construction industry, which has many temporary day laborers and contracts that often expire when projects end, the average monthly number of job changers is generally around 200,000. However, this year, the number has exceeded the usual level by more than 100,000.

The number of involuntary job changers in the construction industry has increased overwhelmingly compared to the same period last year. This year, involuntary job changers in construction increased by 63,000 compared to last year, ranking first among all industrial sectors. Compared to the transportation and warehousing sector, which had the second-highest increase of 13,000, the number of job changers in construction is nearly five times higher.

In fact, some large construction companies are reducing the number of regular employees through voluntary retirement programs held periodically. One of the large construction companies, Company A, has been conducting voluntary retirement for two consecutive years under conditions such as a minimum number of years of service and severance pay equivalent to several months' salary. As a result, the number of regular employees decreased from 4,649 in 2021 to 3,890 last year, and further declined to 3,778 in the third quarter of this year.

Some construction companies have recently reorganized their workforce by downsizing their headquarters and increasing on-site personnel, focusing on strengthening their competitiveness in securing orders.

This trend is expected to continue next year. There are forecasts that other large construction companies will also begin workforce reductions like Company A. The real estate market is rapidly freezing, and factors such as rising raw material prices, an increase in unsold units, and growing uncertainty in project financing (PF) due to high interest rates are likely to weigh heavily on the business environment.

An official from a construction company said, "We are currently establishing next year's management strategy, and some degree of workforce reduction seems inevitable."

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