Do we share the wealth? Not so much
Statistics say no.
The Economic Reform Research Institute under the local civic group Solidarity for Economic Reform last month released a study saying the labor’s income sharing at Hyundai Motor Group from 2011-13 was 54.5 percent. That means the company distributed more than half of its value-added profits to its labor force.
Sounds pretty good? A study by JoongAng Ilbo analyzing wage data from the Organization for Economic Cooperation and Development (OECD) reveals that not all Korean companies reward their workers as much as the nation’s largest automaker.
The study looked only at salaried workers, leaving out entrepreneurs who run small businesses like restaurants, beauty parlors or mom-and-pop stores.
It turns out the average income sharing of the four largest family-owned conglomerates - Samsung Group, Hyundai Motor Group, SK Group and LG Group - from 2012-13 was only 49 percent, meaning they compensate their workers with less than half of the value-added profits they bring in.
More startlingly, Korea is one of the lowest-ranking countries when it comes to sharing profits with workers among 34 OECD member countries.
Nationally, Korea’s labor-income-sharing ratio, which compares total labor compensation to gross domestic product, was 43.5 percent in 2012.
Although this was an improvement from the 42.6 percent reported in 1990, Korea ranked 24th among OECD countries on labor-income-sharing ratio.
This can mean that Korean companies do not acknowledge the value of labor to the same extent as other countries. Countries that have lower ratios than Korea include Poland (37 percent), Greece (34.2 percent) and Mexico (27 percent).
The country that valued the contribution of labor and compensated it best in 2012 was Switzerland at 58.5 percent. United States trailed closely at 53.3 percent.
Japan ranked fifth with 51.9 percent.
“The fact that the value of labor is not properly recognized means that income distribution in the labor market is not properly practiced,” said Cho Joonmo, an economics professor at Sungkyunkwan University. “This is an indicator that shows a serious income imbalance in Korean society.”
The issue of improper distribution of profits has been one of the biggest issues in business and political circles in recent years.
If income distribution is not balanced, the gap between the upper income and lower income classes widens.
There have been concerns that Korea’s middle class has been thinning out.
The OECD data that JoongAng Ilbo studied, in fact, showed Korea ranked second for its ratio of low-income workers as a proportion of the whole work force as of 2012.
The data showed that 25.1 percent of Korean workers lived on only two-thirds of the national median wage. This was significantly higher than the OECD average of 16.3 percent and the rates of European countries like Finland, Belgium and Switzerland, where low-income workers accounted for less than 10 percent of the work force.
At 25.3 percent, the United States was the only country with a higher ratio.
The low-income worker population in Korea actually increased by 0.9 percentage point compared to 2001.
The only good news from the study was that Korean workers have a lower tax burden than their counterparts in most other member countries in the OECD.
Korea ranked 30th when it came to tax burden as of 2013. The tax burden rate was 21.4 percent. That means 21.4 percent of the nation’s GDP is paid in annual taxes. This was higher than the 16.4 percent reported in 2000, but less than other major economies.
According to the OECD, workers in 27 countries spent more than 30 percent of their annual income on taxes. People from Belgium, Germany and Austria paid more than 50 percent of their income for taxes.
But in Korea, the indirect tax ratio is larger than it in other economies, so its tax burden is actually a bit higher.
In addition, the ratio of workers who are exempt from paying income taxes amounts to 36 percent, which also contributes to lowering the overall tax burden.
BY KIM KI-CHAN [firstname.lastname@example.org]