Chaebol are investing more, hiring a bit less

Korea’s top 30 conglomerates including Samsung and Hyundai will invest 16 percent more this year than last but will hire 6.3 percent fewer entry-level workers, according to a survey by the Korea Federation of Industries (FKI), a top business lobby, on Monday.

The combined investments by those 30 enterprises will tally 136.4 trillion won ($120.5 billion) this year, up from 117.1 trillion won last year. But the number of new recruits of Koreans fresh out of college will only total 121,800 compared to 129,989 last year.

Companies said the increase in base wages as a result of regulatory changes was a factor.

Still, the total number of employees is expected to expand by 1 percent on year to 1.16 million this year.

Major portions of their investments will go to facilities. Facility investment will be pumped up by 19.9 percent year-on-year to tally 102.8 trillion won, while spending on research and development will be up 7.4 percent from a year earlier to total 33.6 trillion won.

“Despite the weak economic situation, major conglomerates are set to make bold facility investments in fields like semiconductors, organic light-emitting diodes [OLED], retail and energy and concentrate on R&D projects aimed at developing new growth engines,” said the lobbying group in a release.

To name a few examples of facilities investment, Samsung has earmarked over 20 trillion won for constructing a semiconductor production line and adding an OLED line at its facilities in Pyeongtaek, Gyeonggi this year.

Hyundai Motor has set aside over 10 trillion won to build a global business center on a newly purchased plot in Samseong-dong, southern Seoul. SK has pledged 1.5 trillion won to broadening its long-term evolution connection coverage. Lotte will spend 1.2 trillion won on adding new outlets and markets.

A few large R&D projects include LG’s science park, to be constructed by 2020 with a budget of 4 trillion won. Daewoo Shipbuilding and Marine Engineering will spend 600 billion won on an engineering center in the same area of Magok, western Seoul, set for completion in 2017.

“Should the government exert efforts to ease tight regulations as it promised earlier, the top 30 companies will proceed with their investment plans for this year with no glitch,” said Song Won-geun, head of economic research division at the FKI.

Of those 30 groups, seven said the number of their employees will increase this year whereas 19 said it would shrink.

“The trend of companies reducing new recruits may persist for the coming years,” said the FKI. “As the corporate community is under mounting pressure from the government policy of extending the retirement age up to 60 and ongoing ordinary wage negotiations, the room to hire entry-level workers is narrowing.”

Currently, the average age for retirement at large companies is about 53 but when the new retirement age rule goes into effect next year, more workers are likely stay through their mid 50s.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]