Wages increase 5.3% on year in first half of 2022

Economy

Published: 04 Aug. 2022, 16:44

Wages increase 5.3% on year in first half of 2022

Hyundai Motor and its labor union agrees on a wage increase in July. In the frist half, companies and labor unions agreed on an average wage increase of 5.3 percent. [YONHAP]

Wages increased an average of 5.3 percent on year in the first half of this year amid rising inflation, according to the Ministry of Employment and Labor on Thursday.

The increase is up from the 4.2 percent wage hike in the first half of 2021.

The ministry's study was based on wage negotiations made within the first six months of 2022 at 3,616 companies with 100 or more employees.

Rising consumer prices have likely played a significant role in wage negotiations this year, as consumer prices in May rose 5.4 percent year-on-year.

Consumer prices rose more than 6 percent on year in June and July, the sharpest rise in 24 years.

Of all industries, IT company wages saw the steepest rise. On average, wages at IT companies rose 7.5 percent.

Most survey respondents, at 63 percent, believed that the massive profits that IT companies made during the pandemic are considered to have played a significant role in the sharp increase, and 14.5 percent cited securing and managing talents as another key factor.

Kakao in February announced that it was raising the wages of its employees by 15 percent. Naver raised its employees’ wages by 10 percent.

The construction industry raised the wages of its employees by an average of 6.4 percent, while manufacturers trailed behind with 6 percent.

Companies that performed well last year are considered to have helped bring up the average wage increase to above 5 percent.

Of those surveyed, 40.3 percent responded that the biggest factor that labor unions considered during their wage negotiations this year was the company’s performance last year. The second most commonly cited factor was the minimum wage level, at 32.2 percent.

Other factors that respondents said were considered during the wage negotiations included the wage level within the same industry, at 9.2 percent, and job security, at 6.8 percent.

The wage increase in the private sector stood out considering that wages in the public sector, which include state-owned companies, were limited to a 1.4 percent hike.

The Yoon Suk-yeol government announced it would wield stricter control over its budget, while many public companies including Korea Electric Power Corp. are suffering from an increasing deficit.

Last year’s performance played a more significant role in determining the increase in wages at IT companies as well as for manufacturers, construction companies and in wholesale and retail.

Minimum wage was another key factor in determining the wages in the service sector.

In general, the bigger the company, the higher the increase in wage hikes.

Companies with 1,000 or more employees raised the wages an average 5.6 percent. Those with 300 or more employees saw wages rise an average 5.4 percent whereas smaller businesses raised wages an average 5.1 percent.

Employment Minister Lee Jung-sik said larger companies and their labor unions should consider the difficult situation that smaller companies would have to face when determining how much to increase their wages.

“While the wage decision is entirely up to the management and labor union, they should consider the labor market’s structural problems as well as the cooperative existence between larger companies and small- and medium-sized enterprises,” Lee said.

Finance Minister Choo Kyung-ho, also the deputy prime minister on economics, earlier asked companies, particularly IT companies, to refrain from raising wages too much as it could fuel inflation further.

"Excessive wage raises not only worsen inflation but also widen the wage gap between large and small companies," Choo said in late June at a meeting with businesses at the Korean Enterprises Federation, on June 28.

He added that the dynamic will starve smaller companies of talented workers.

"It won't be easy for companies to maintain competitiveness by paying high wages and high costs," Choo said, adding that high pay at tech companies and other large enterprises is starting to influence the broader market for employees.

BY KIM KI-CHAN, LEE HO-JEONG [lee.hojeong@joongang.co.kr]