Slower growth in labor unions to tame Korea‘s inflation

HONG KONG -- Slower growth in the number of labor unions will likely cool down South Korea’s inflation, reducing pressure to hike wages, a report said Thursday.

South Korea’s labor unionization rate dropped to 9.8 percent in 2010, compared to the peak of 19.8 percent in 1989, Nomura International Ltd. said in a report, citing government statistics.

“We expect Korea’s consumer price index to slow from 4.2 percent in 2011 to 3.5 percent in 2012,” said Kwon Young-sun, senior economist at Nomura.

“Any wage-inflation spiral at present would be less strong relative to the period from 1980-90. Given increasing risks of a global recession, lower unionization rates should help contribute to disinflation in South Korea.”

Kwon said the downtrend in union membership suggests the bargaining power of labor unions has deteriorated significantly over time.

South Korea’s inflation remains persistently high, fueled by higher oil and other commodity prices.

Consumer prices in South Korea grew at a slower pace in October than a month earlier, however, falling below the 4 percent mark for the first time this year.

The key gauge of inflation rose 3.9 percent last month from a year earlier, slowing from the 4.3 percent on-year gain in September.

The October figure marked the first time this year that the index has fallen below the government’s annual inflation target of 4 percent for 2011.

(Yonhap News)