Pay increases drop for 5th straight year

A Seoul station at rush hour

Larger companies boost employees' pay the least, survey finds

The average rate of pay increase at Korean companies this year stood at 5.4 percent, falling again for the fifth straight year. The gap in overall salary between large companies and small to mid-sized ones shrunk slightly.

The Korea Employers Federation surveyed 1,327 companies with more than 100 employees nationwide and published the results in The 2006 Wage Survey on December 10. The survey found that the average rate of pay increase agreed upon by employees' unions and employers was 5.4 percent (based on ordinary wages), dropping 0.1 percentage point.

Including this fall's figures, the pay increase rate has been dropping for five straight years. It was at 7.6 percent in 2002, 7.5 percent in 2003, 5.7 percent in 2004, and 5.5 percent in 2005.

The larger the company's size, the smaller the pay increase. Companies with 100 to 299 employees raised pay by 5.4 percent; those firms with 300 to 499 employees boosted pay by 5.5 percent, and companies employing 500 to 999 people gave them a 5.1-percent pay increase.

This made the wage gap between large and mid- to small-sized companies decrease slightly, a gap that had been widening for the last few years. Assuming the salary of a newly promoted general manager at a company with 100 to 300 employees to be 100, the relative wage index for companies with more than 1,000 employees shot up to 145.7 in 2003 from 113.4 in 1998. But this year, the wage index petered out at 134.4, marking the third consecutive year of decrease.

While labor unions demanded an average 10.4 percent increase, employers brought the figure of 4.1 percent to the bargaining table. The gap between the two offers was thus 6.3 percent, an increase over last year's gap of 5.4 percent. The Korea Employers Federation said the gap widened because the union demanded greater welfare benefits in addition to the pay increase, and employers proposed a lower increase rate due to a slowdown in the business environment.

The survey also found that the for companies paying month-to-month wages, the average monthly pay for employees fresh out of four-year colleges was 1.87 million won (US$2,000), and the same figure for new mid-level managers was 3.99 million won, a jump of 55,000 and 1,000 won, respectively, over last year's figures. Companies that used an annual salary basis showed higher pay rates than companies using monthly salaries, with average monthly pay for new graduates and mid-level managers at 2.16 and 4.55 million won, respectively.

Please direct questions or comments to [[e-mail]]