Seoul: A recent study has revealed that manufacturing wages in Korea now significantly exceed those in Japan and Taiwan, a shift from about a decade ago when the differences were minimal.
According to Yonhap News Agency, the Korea Enterprises Federation released findings showing that last year, the annual wages of regular workers in Korea's manufacturing sector were 27.8 percent higher than in Japan and 25.9 percent higher than in Taiwan.
The study highlights that across all industries, annual wages in Korea exceeded those in Japan by 23.7 percent and those in Taiwan by 16.2 percent. The widening gap is attributed to wage growth in Korea significantly outpacing that in Japan and Taiwan. From 2011 to 2024, wages for regular workers in Korea rose by 64.4 percent, compared to 34.2 percent in Japan and 54.4 percent in Taiwan. In the manufacturing sector alone, Korea's wage growth was 82.9 percent, sharply contrasting with Japan's 35 percent.
The disparity is particularly noticeable among large companies, where the wage gap between Korea and Japan stands at 58.9 percent, compared to 21.9 percent for small and midsized firms. While sharing corporate growth and profits with workers is encouraged, the dual structure of Korea's labor market remains a pressing concern. Regular workers at large companies enjoy high wages supported by strong unions and pro-labor policies, whereas employees at smaller firms and irregular workers face lower wages and stagnant growth.
High wages threaten to erode the competitiveness of Korean products, which would need to be priced significantly higher than Japanese or Taiwanese competitors if profit margins and nonwage costs were equal. A report by the Korea Chamber of Commerce and Industry noted that from 2018 to 2023, wages rose by an annual average of 4 percent, while productivity increased by only 1.7 percent per year. Additionally, Korean companies competing globally face the challenge of stringent regulations.
This dual burden of high wages and tough regulations may explain why Korea now trails behind China in four of its five key manufacturing industries: semiconductors, automobiles, machinery, steel, and chemicals. An analysis by the Korea International Trade Association shows that Korea led only in semiconductors last year.
As Korean firms, especially in high-tech sectors like semiconductors, prepare to face competition from China, Japan, and Taiwan, they are constrained by the rigid 52-hour workweek. This policy, enforced without exception, limits even R and D staff, impacting Korea's standing in the semiconductor industry. The upcoming "Yellow Envelope" Act, expected to take effect in March, could further fuel wage hike demands from subcontractor unions.
Korean companies have long struggled with a high-cost business structure, compounded by stringent corporate regulations. For sustainable growth, it is crucial to restrain wage growth and pursue pro-business institutional reforms.