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S. Korea Real Wage Grew Faster Than Economy
World Economy

S. Korea Real Wage Grew Faster Than Economy

Real-wage growth surpassed economic growth in Korea last year mainly due to a record-low inflation rate, government data showed Sunday.
According to the finance and labor ministries, the inflation-adjusted monthly salary at workplaces with five or more regular employees grew 2.7 percent on-year to an average of 3 million won ($2,510) in 2015.
It was the first time since 2012 that real wages -- adjusted to reflect purchasing power -- grew faster than the economy itself. Korea’s gross domestic product growth last year was 2.6 percent in real terms.
The main reason behind the wage’s outrun in 2015 was inflation, which fell to a record low of 0.7 percent on sharply lower prices of oil and the overall economy’s slowdown.
The nominal income was up 3.5 percent in 2015, compared to the previous year’s 2.5 percent increase. The government-set minimum hourly wage increased by 7.1 percent.
A look at five-year average figures, however, reveals that real-wage growth lags far behind that of GDP, indicating that Asia’s fourth-largest economy is growing without returning its benefits to workers.
Between 2011 and 2015, workers’ real income increased a meager 1.34% per year on average, compared to the 2.96% pace of GDP growth for the corresponding period.
Stagnating real wages is a trend that set in after the global financial crisis in 2008.
Income growth, which was almost 20% between 1997 and 2002, came down to 2.3% in the 2007-2012 period.
The annual growth in the inflation-adjusted income stood at 2.5% in 2013 and 1.3% in 2014.
With exports, the main pillar of economic growth in South Korea, getting pounded by global trade woes, the South Korean government is trying to keep the growth engine going strong by spurring domestic consumption. However, bolstering wages is not seriously considered due to strong opposition from employers.

 

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