Twenty years ago, the wage level of workers in South Korea was not even half of that in Japan, but now it has surpassed Japan. The wage gap between large, medium, and small-sized enterprises has further widened due to the cumulative wage increases in large companies.
On March 17, the Korea Enterprises Federation (KEF) revealed these findings through a report on the trends and implications of wage situations in South Korea and Japan, comparing them internationally.
The KEF compared the total monthly wages of fully employed workers in South Korea and Japan in 2002 and 2022. In 2002, South Korea’s average total monthly wage was 1,798,000 won (US$1,349.85), which was less than half of Japan’s 3,854,000 won for the same year. However, in 2022, South Korea’s average total monthly wage exceeded Japan’s, reaching 3,998,000 won compared to Japan’s 3,791,000 won. The average total monthly wage was calculated by summing up the base salary and special allowances of fully employed workers in companies with 10 or more employees.
In 2002, the wage levels in South Korea varied by the size of the enterprise. At that time, the average wage in large companies was 2,284,000 won, while in small and medium-sized enterprises (SMEs) it was 1,608,000 won. These figures were lower than those in Japan, where wages in large companies averaged 4,836,000 won and in SMEs it was 3,106,000 won. However, by 2022, both large companies and SMEs in South Korea surpassed their counterparts in Japan.
The wage increase rates between 2002 and 2022 reveal significant differences between South Korea and Japan. In South Korea, the wage increase rate for large companies reached 157.6 percent, while in Japan, it experienced a decrease of 6.8 percent. Similarly, for SMEs, Japan saw only a 7.0 percent increase, whereas South Korea recorded a much higher increase rate of 111.4 percent.
The KEF emphasized that when considering changes in working hours, the wage increase rate difference between South Korea and Japan becomes even more significant. While South Korea’s monthly working hours decreased by 13.8 percent from 2002 to 2022, excluding overtime hours, the total monthly wage amount, excluding overtime pay, increased by 122.3 percent. Consequently, the hourly wage rose from 9,954 won in 2002 to 25,661 won in 2022, representing a 157.8 percent increase. In contrast, Japan experienced little change in working hours and wages over the same period, resulting in similar hourly wages in 2022 compared to 2002.
The hourly wage growth rates for SMEs and large companies in South Korea reached 152.5 percent and 183.1 percent, respectively. However, in Japan, the hourly wage for SMEs increased by only 8.9 percent. Interestingly, for large companies in Japan, there was a decrease of 9.7 percent in hourly wages.
When considering not only working hours but also the economic growth rate, which significantly influences wage increase rates, the wage increase rate for South Korea was analyzed to be significantly higher than that of Japan.
From 2002 to 2022, the wage increase rate per hour in South Korea's large companies was 183.1 percent, which was higher than the per capita nominal GDP growth rate of 154.2 percent. However, in Japan, despite a slight increase in per capita nominal GDP at 8.8 percent, the hourly wage in large companies decreased by 9.7 percent. Additionally, both hourly wages and total monthly wages showed similar trends.
The wage gap between large firms and SMEs was even wider in South Korea. In 2022, when the wage level of large companies was set at 100, the wage level of SMEs in South Korea was 57.7, lower than Japan’s 73.7. Back in 2002, Japan’s wage level was 64.2, lower than South Korea’s 70.4. However, over the past 20 years, the wage level in South Korean large companies has increased significantly, leading to a widening wage gap compared to Japan.