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FKI says wages rose too much

Office workers in Busan are pictured on their way to work on a rainy morning in the beginning of July. (Yonhap)
Office workers in Busan are pictured on their way to work on a rainy morning in the beginning of July. (Yonhap)
The Federation of Korean Industries said on Wednesday that the average annual wage per employee of listed companies rose 43.4 percent in the 10 years preceding 2021. During that time, their average revenue only rose 12.5 percent.

The average annual salary per worker jumped from 55.93 million won ($42,600) in 2011 to 80.16 million won in 2021, while the listed firms’ revenue per employee went from 960 million won to about 1.1 billion won in the same period, the lobby of the nation’s largest businesses said in a press release about its recent study.

However, the FKI said it didn’t include the average operating profit growth in its analysis because it believes revenue is a more relevant factor in setting wages.

“Operating profit is revenue minus all operating costs such as wages and production costs ... Some companies post losses, but they still have to pay their employees,” Kim Yong-choon, head of the FKI’s employment policy team, told The Korea Herald.

“Also, operating profits fluctuate a lot. So we deemed that revenue was more relevant.”

Labor unions of large Korean companies typically demand wage hikes citing the increase in their employers’ profits. Some strong and often militant unions, including that of Hyundai Motor, have long been criticized for making excessive demands despite being paid relatively high.

Except for 2012, 2017 and 2021, the year-on-year growth of wages per worker was steeper than that of the revenue per employee over the past 10 years.

Between 2013 and 2016, and between 2019 and 2020, the revenue per employee dropped on-year, but the wages per person still increased.

Apart from 2017, when semiconductors were in great demand, and 2021, when COVID-19 helped IT, game, and telecommunication companies reap strong earnings, per capita wages always rose more steeply compared to per capita revenues, the FKI said.

South Korea’s labor cost growth was faster than that of major developed economies – the US, Japan, Germany, the UK and France.

Citing OECD statistics, the FKI said that the labor compensation per employed person in Korea’s manufacturing sector rose 37.6 percent in the 10 years to 2019, while its labor productivity per employed person rose only 29.1 percent.

The five advanced economies’ average labor compensation and labor productivity grew 23.6 percent and 22.3 percent, respectively, in the same period.

“Excessive wage hikes in proportion to productivity growth will not only pull down companies’ competitiveness but also incite product price hikes and lead to inflation,” Choo Kwang-ho, chief of FKI’s economic research division, said.

“For companies to survive and keep jobs amid uncertainties in the international and domestic business environment, steep wage hikes should be avoided, and labor and management should work together to raise productivity.”

By industry, travel agencies and travel assistance service providers showed the highest growth of average wage divided by revenue – 10.1 percentage points – followed by film and broadcast producers and distributors (9.6 percentage points); rubber products manufacturers (7 percentage points); construction technology and engineering service providers (6.7 percentage points); print publishers (6.5 percentage points); electricity and telecommunication builders (6.1 percentage points); food, beverage and tobacco wholesalers (5.8 percentage points); processed metal manufacturers (4 percentage points); shipbuilders (3.8 percentage points) and chemical fiber manufacturers (3.7 percentage points).

By Kim So-hyun (sophie@heraldcorp.com)
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