Wage Gaps: Small, Midsized Companies' Wages are Only 63% of Conglomerates | BusinessKorea

Sunday, March 18, 2018

South Korea sees a considerable wage gap between small and medium-sized enterprises (SMEs) and big enterprises.
South Korea sees a considerable wage gap between small and medium-sized enterprises (SMEs) and big enterprises.
23 March 2017 - 11:00am
Jung Suk-yee

There is a considerable wage gap between small and medium-sized enterprises (SMEs) and big enterprises in South Korea.

During the “Debate on the Easing of Wage Gap between SMEs and Conglomerates and the Improvement of Productivity” held at the building of the Korea Federation of Small and Medium-sized Businesses in Yeouido, Seoul, on March 22, the Korea Small Business Institute (KOSBI) said that the average monthly paycheck of SMEs last year stood at 3.23 million won (US$2,881), which was only 62.9 percent of 5.13 million won (US$4,576) provided by conglomerates. SMEs’ average regular pay and overtime pay were 75.6 percent and 59.6 percent of those of large companies, while its average special pay, including bonus, remained at only 28.9 percent.

In particular, the average wage of SMEs in the manufacturing industry was far below the overall average with 54.9 percent of conglomerates. The total amount of wages provided by SMEs kept falling from 77.3 percent of large companies in 1997 and has remained at the 60 percent-level for a decade. The gap of the average regular pay widened from 92.5 percent in 1997 to 75.6 percent in 2016 as well as the special pay from 52.1 percent in 1997 to 28.9 percent in 2016. However, the gap of the average overtime pay slightly eased from 56.1 percent in 1997 to 59.6 percent last year.

The wage gap between SMEs and conglomerates also exist in other countries. The average annual wage per SMEs’ employee in the US was US$42,133 (47.23 million won) as of 2014, standing at 76 percent of US$55,416 (62.12 million won) of big businesses. In Japan, each employee of companies with less than 100 staff made 3.71 million yen (US$33,305 or 37.33 million won) a year on average as of 2015, which was 77.9 percent of 4.76 million yen (US$42,731 or 47.9 million won) provided by companies with more than 100 employees.

According to the analysis of labor productivity by company size, domestic SMEs in the manufacturing sector had a very low labor productivity with 29.1 percent compared to large companies as of 2014. The differential kept widening from 33 percent in 2008 but the figure slightly dropped recently. Advanced industries, such as semiconductor (26.3 percent) and cellphone (9.6 percent) had a bigger productivity gap than automobile (47.8 percent) and steel (46.5 percent).

In comparison to advanced economies, domestic SMEs in the manufacturing industry have 29.1 percent of labor productivity, which is critically lower than that of conglomerates. The labor productivity figures of SMEs compared to large enterprises in major countries are 70 percent in France, 60.8 percent in Germany, 57.5 percent in the U.K. and 56.5 percent in Japan. 


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