Real wages decline in Korea due to high inflation

[Image source: Gettyimagesbank]

The average real wage of workers in Korea in qthe first five months dropped from a year ago due to high inflation.

According to a labor force survey released by the Ministry of Employment and Labor on Monday, the cumulative average monthly wage of commercial workers from January to May this year was 3,979,000 million won ($3,111), up 2.5 percent from the same period last year based on a simple comparison of the amount.

However, real wages, which reflect the level of inflation, fell. The average monthly real wage for the first five months of this year was 3,598,000 million won, down 1.7 percent from 3,660,000 million won during the same period last year. This means that although the monthly paycheck deposited into bank accounts increased by 95,000 won, the actual perceived income decreased by 63,000 won. The survey was conducted with businesses that have 300 employees or fewer.

This is the first time since 2011 that the cumulative real wage growth rate from the beginning of the year to May was negative. From January through May 2021, the cumulative real wage growth stood at around 0 percent, but it didn’t go negative. The decline in real wages, even as nominal wages rose, was driven by higher inflation. Inflation peaked at 6.3 percent in July last year and has been falling ever since, reaching 3.7 percent in April. While inflation has slowed compared to last year, it remained high in the first half of this year. Up until May this year, the cumulative consumer price inflation rate was 4.2 percent. In comparison, the inflation rate for the same period in 2022 was 4.3 percent, 1.9 percent in 2021, and 0.5 percent in 2020.

On a month-to-month basis, real wages fell for the third month in a row. As of May, the average monthly gross wage per worker was 3,703,000 million, up 3.1 percent from 3,592,000 million during the same period a year earlier, but real wages fell 0.2 percent from 3,339,000 million to 3,332,000 million.

Real wages fell for 10 consecutive months from April to January this year due to record-high prices last year. It rebounded briefly in February this year but has now fallen for three months.