SEOUL, June 1 (Korea Bizwire) – An employee working for small and medium-sized companies (SMEs) in South Korea gets paid on average a little over half of the wage provided to a person employed at a large firm, a local report showed Wednesday, reflecting the big gap in wages within the country.
The average monthly wage of SME workers stood at 3.23 million won (US$2,881) in 2016, or 62.9 percent of 5.13 million won paid to those working for a big enterprise, according to the latest report by the local think tank Korea Small Business Institute (KSBI).
The findings attest to the problems in the job market in Asia’s fourth-largest economy, which has seen a widening of the wage discrepancy between large and smaller companies. Such developments have raised concerns about undermining balanced growth and social cohesion.
The wage gap is also cited as a key reason that young jobseekers are hesitant about starting their careers in SMEs. Many who start off their careers at smaller firms eventually quit in the first couple of years.
A separate report by a research institute in South Chungcheong Province found that a pay raise for a large-company employee comes at the expense of a SME worker’s wage cut.
As many of the smaller firms are subcontracted by the large companies, if their main contractor chooses to raise pay for their workers, this inevitably entails a demand to lower the unit costs for products shipped by SMEs that can hurt workers hired by smaller companies.
Reflecting this, the report claimed that a SME workers’ pay is inversely proportional to that of people working for large firms.
The research report advised smaller firms to reduce dependency on subcontracted work and try to make forays into new exporting markets, while also beefing up its research and development (R&D) to secure exclusive technologies.