The starting annual salary for university graduates in South Korea averaged 36.75 million won ($33,150) in 2023, with large corporations employing more than 300 people offering an unprecedented average of $45,150. When adjusted for purchasing power parity (PPP), this equates to an average of $45,401, approximately 30% higher than Japan’s $34,794.
Furthermore, the starting salary for graduates at S. Korean firms with more than 500 employees, averaging $57,568, was 1.58 times higher than the $36,466 offered by Japanese companies with over 1,000 employees. A direct comparison of 1,000-plus-employee companies would likely reveal an even wider gap.
The starting salaries at S. Korea’s large companies are equivalent to 99.2% of the country’s per capita GDP, while in Japan, the figure stands at 72.7%. Even when including small and medium-sized enterprises (SMEs), the overall average starting salary for university graduates in S. Korea amounts to 78.2% of its per capita GDP, surpassing Japan’s 69.4%.
While S. Korea’s per capita GDP overtook Japan’s last year, Japan remains the world’s fourth-largest economy, with a total economic output 2.5 times that of S. Korea. For S. Korean wages to surpass Japan’s, productivity would need to rise proportionally; however, the current data raises doubts about such alignment.
Higher wages for university graduates add to the country’s high-cost economic structure, but an even bigger issue lies in the stark wage gap between large corporations and small and medium-sized enterprises (SMEs).
On average, university graduates at companies with fewer than 300 employees earn just 64.7% of what their peers at larger firms receive. To put it into perspective, Under a scale where the starting salary at SMEs with 10–99 employees is set to 100, Japanese large companies rank at 114.4, while S. Korean large companies reach 149.3. This starkly illustrates the much wider wage gap between large and small businesses in S. Korea compared to Japan.
As a result, SMEs in S. Korea face severe hiring difficulties, while younger job seekers shun SME positions, claiming a lack of desirable employment opportunities.
The Korea Enterprises Federation attributed the high wages at large S. Korean corporations to seniority-based pay systems and union-driven wage premiums, noting that these salaries are not necessarily tied to productivity. Excessive wages are unsustainable and erode corporate competitiveness. Large corporations must moderate entry-level salary increases and shift from seniority-based pay to performance-based systems.
Labor reforms present the ultimate solution, but significant changes are expected to take time.
