[Productivity Diagnosis] The Nation of Meetings, Reports, and Overtime: How “Pretending to Work” Is Driving South Korea’s Economic Slowdown

“Productivity Stagnation Accelerates Capital Flight”
Executives Lack Awareness and Will for Innovation
System Maturity Lags Behind Human Capital Levels

A new study has found that every 0.1 percent drop in South Korea’s productivity drags down the nation’s GDP by 0.15 percent. Identifying the root cause of economic stagnation as the collapse of work efficiency, the research suggests that Korea’s long-standing way of working has reached its limits. Despite repeated efforts to reduce working hours, productivity has barely improved—turning labor practices into a structural drag on both social and economic performance. Experts warn that organizational cultures prioritizing process over results, coupled with rigid decision-making systems, are choking workplace efficiency and undermining the broader economy’s resilience.

The Vicious Cycle of “Formal Hard Work”

According to the Korea Development Institute (KDI), South Korea’s ratio of net outward investment to national income surged from 0.7 percent between 2000 and 2008 to 4.1 percent between 2015 and 2024—roughly a sixfold increase. In a recent report titled “Macroeconomic Background and Implications of Rising Overseas Investment,” KDI argued that this rise reflects declining domestic productivity. The analysis found that a 0.1 percent fall in productivity leads to a 0.05 percent drop in domestic investment due to capital outflows, ultimately shrinking GDP by 0.15 percent. The report also pointed out that total factor productivity (TFP) has sharply decelerated since the 2000s, weakening returns on domestic investment and accelerating the exodus of capital.

A key cause of low productivity is the entrenched inefficiency of workplace culture. A survey by the Korea Employers Federation of 50 major member companies found that employees spend an average of 1 hour and 20 minutes per day on non-work activities. That amounts to about 17 percent of an eight-hour workday—not merely a sign of laziness, but of poorly structured work processes and inadequate environments for concentration. Undefined roles, responsibilities, and time allocations lead to weak engagement during working hours and fuel a cycle of overtime and exhaustion.

An irrational compensation system exacerbates the problem. Korea’s seniority-based wage model rewards years of service rather than efficiency. As of 2023, 12.7 percent of domestic firms used seniority pay systems; among companies with over 100 employees, the figure reached 54.4 percent, and among those with more than 300, 58.4 percent. This has widened income disparities. According to the Korea Labor Institute, employees with over 30 years of service earned 4.39 times more than those with less than one year—far higher than Japan’s ratio of 2.54 and Germany’s 1.88. Such systems weaken incentives for self-improvement and increase wage rigidity for companies already facing slow growth.

Labor unions argue that reducing total working hours is key to raising hourly productivity. They say excessive work hours still persist at small and mid-sized enterprises, where lower subcontracting prices imposed by large corporations erode efficiency. Employers counter that working hours have fallen faster than productivity has improved, citing rigid labor laws and militant unions as obstacles to flexibility. Despite differing diagnoses, both sides agree on one issue: the core problem lies in how working hours are structured—and what is actually produced during them.

Executives Focused on Risk Avoidance

At the corporate level, experts point to deeper causes within managerial and decision-making structures. As organizational hierarchies grow steeper, communication between executives and field workers weakens, degrading the quality of information that underpins decisions. In many Korean companies, report writing and documentation dominate operations, consuming excessive time on political phrasing while delaying substantive discussion. This environment erodes decision speed and accuracy and discourages innovation.

The absence of detailed job analysis also contributes to inefficiency. Enhancing productivity and engagement requires dividing tasks into clear units and specifying the personnel, time, and responsibilities needed—but many Korean firms still follow “all-in-one” work practices, where one employee handles everything. This may simplify oversight for managers but prevents parallel processing and specialization. Ambiguous job boundaries also blur accountability, leading to spontaneous orders and repeated rework.

Distorted reward systems further undermine performance. While there is growing consensus on the need to shift toward performance-based pay, poor implementation risks promoting exploitation or superficial competition. When short-term metrics such as sales dominate evaluations, managers focus narrowly on “hitting numbers.” Conversely, if efficiency indicators—like faster decision cycles or fewer reworks—become the measure of success, management naturally shifts toward quality and productivity. In this view, executives themselves must become subjects of performance evaluation, with decision-making costs and lead times serving as key benchmarks.

An Inefficient System Eating Away at Long-Term Growth

Experts express deep concern that Korean workplaces are trapped in a cycle of stagnant management productivity and declining labor output. Bank of Korea Monetary Policy Board member Jang Yong-seong attributes this to a “failure of talent allocation.” He noted that as of 2023, Korea’s labor productivity indices per capita and per hour stood at 59 and 56, respectively—below the OECD average (70 and 76) and far behind the U.S. benchmark of 100. “Korea doesn’t lack intellectual capital,” Jang said. “The problem is misallocation—people with high capabilities are not being used where they are most effective.”

He cited the education and employment system as evidence. Korean middle and high school students rank near second globally in math and science performance, and IQ studies (University of Ulster) place the country sixth worldwide. “Yet seniority-based promotion, academic and regional ties, and rotational appointments dilute these talents,” he explained, “spreading capable people too thinly and eroding marginal productivity.” In other words, while individuals possess strong abilities, the transition from education to employment fails to match talent with suitable roles.

Building on this awareness, experts propose redesigning job definitions, performance metrics, and workforce deployment systems. Sogang University economics professor emeritus Cho Jang-ok argues that “the most urgent task is to clearly define roles, responsibilities, required personnel, and time per task, while eliminating low-value activities like redundant reporting.” He added, “Next, performance evaluations should emphasize decision-making speed, bottleneck removal, and reduced delays—starting from the executive level.” The goal, he said, is not to shift the workload onto employees but to ensure transparency in staffing and evaluation standards, with management’s design competence itself becoming a measurable performance indicator.