Wage Power
Some Korean laborers earn more money than Japanese laborers. It has been revealed that the average salaries of workers in Korea’s three major export industries -- automobile, shipbuilding, and electronics – outstripped those of workers in the three industries of Japan. Some are concerned that a rise in labor costs is weakening the price competitiveness of Korean products in the export market, at a time when a weakened Japanese yen is elevating that of Japanese products.
Last year, the average salaries in the Korean and Japanese automobile industry stood at 82.83 million won (US$71,237) and 6.88 million yen (US$57,446), respectively, according to the Electronic Disclosure System of the Financial Supervisory Service (FSS) and Japan’s Bureau of Statistics and Ministry of Health, Labour and Welfare. A similar phenomenon has happened in the shipbuilding industry as well. The average salary in the Korean shipbuilding industry outnumbered that in the Japanese shipbuilding industry by 73.37 million won (US$63,101) to 6.23 million yen (US$52,019).
In the electronics sector, similar stories are told even though there are some differences by division. In the semiconductor industry, Japanese laborers receive 6.36 million yen (US$53,104) a year on average. But Korean laborers’ annual salaries average 67.54 million won (US$58,087). In the home electronics and electric industries, Japanese laborers earn a little more than Korean laborers.
Taking into consideration the two nations’ buying power, the gap between the salaries in Korea and Japan further widens. If applying a Purchasing Power Parity (PPP) exchange rate, the average salary in the automobile industry is US$96,610 in Korea and US$65,355 in Japan. The foreign exchange rate plays a role too. The Japanese government pumping money into the economy has lowered the value of the Japanese yen against the U.S. dollar 6.7 percent over the past three years.
A rise in labor costs parallels a drop in cost competitiveness. In Aug. alone, Korea’s automobile exports dropped 6.7 percent year-on-year. “A weakened Japanese yen and a drop in consumer price growth caused by a long economic slump began to reverse salaries in Korea and Japan in 2013,” said a research fellow at the Korea Institute for International Economic Policy. “As Korea is shoved in price competitiveness, Korea has to set itself apart from others in expanding its business in the world market, not with low prices but through technology development.”