South Korea’s large corporations have seen average wages rise 2.6 times over the past two decades, far outpacing the 1.8-fold increase in the European Union (EU) and wage declines in Japan over the same period, according to a new report.
In 2002, the average salary at South Korean conglomerates was 27.41 million won ($20,800). By 2022, it had climbed to 70.61 million won ($53,600). Meanwhile, wages at large Japanese corporations fell from 5.805 million yen ($37,300) in 2002 to 5.41 million yen ($34,700) in 2022.
Analysts attribute South Korea’s rapid wage growth to its seniority-based pay system and strong labor unions, which have driven salaries up regardless of productivity or performance. Some warn this trend could erode the competitiveness of the country’s major corporations.
On Feb. 16, the Korea Enterprises Federation (KEF) released a report titled “International Comparison of Wage Levels by Company Size in South Korea, Japan, and the EU.” The study examined 22 countries, including South Korea, Japan, and 20 EU member states. KEF said its analysis was based on comparable wage data, excluding bonuses and excess pay.
The report found that wages at South Korean conglomerates rose 157.6% over the past 20 years. By contrast, wages in the EU increased 84.7%, while Japan saw a 6.8% decline. South Korea ranked fifth among the 22 countries surveyed in terms of average wages at large corporations, adjusted for purchasing power parity, trailing only Luxembourg, Germany, France, and Ireland. Japan ranked 12th.
Even when accounting for broader economic conditions, South Korean corporate wages were among the highest globally. The country’s large corporation wage levels stood at 156.9% of its per capita gross domestic product (GDP), ranking third overall. Greece (166.7%) and France (160.6%) held the top spots, but South Korea far outpaced key competitors with similar industrial structures, such as Germany (136.7%, sixth) and Japan (120.8%, seventh).
“South Korea’s large corporations pay significantly higher wages than their Japanese counterparts and rank among the top in the EU due to strong labor unions and a seniority-based wage system that has driven up salaries beyond productivity levels,” KEF said.
The wage gap between large corporations and small and medium-sized enterprises (SMEs) in South Korea has widened more than in other countries, largely due to the sharp rise in conglomerate wages.
According to KEF, employees at Japanese SMEs earned 73.7% of the salaries of those at large corporations in 2022, while the figure stood at 65.1% in the EU. In South Korea, however, SME employees earned just 57.7% of what workers at large firms made.
In 2002, South Korean SME wages were 70.4% of large corporation wages, but the gap has widened by 12.7 percentage points over two decades. KEF noted that while SME wages in South Korea have risen faster than in the EU or Japan, the rapid increase in large corporation wages has further widened the disparity.
Between 2002 and 2022, wages at South Korean SMEs increased by 111.4%, compared with 56.8% in the EU and 7% in Japan. Among the 22 surveyed countries, South Korea ranked seventh in wage growth for large corporations and eighth for SMEs.
“The countries with higher wage growth rates than South Korea—such as Romania, Bulgaria, Lithuania, Slovakia, Latvia, and Hungary—are not direct competitors in terms of economic scale or industrial structure,” KEF stated. “Compared with major competitors like Germany, France, Italy, and Japan, South Korea’s wage growth rate is significantly higher.”
KEF Chief Economic Researcher Ha Sang-woo warned that continued sharp wage increases at large corporations, coupled with potential legal extensions of the retirement age, could further strain the job market.
“If this trend continues, high wages at large corporations will limit their ability to hire new workers and deepen labor market disparities,” Ha said. “Given the deteriorating growth prospects for South Korean companies, wage increases not backed by productivity gains are unsustainable. It is crucial to transition to a wage system based on job performance and competence.”
