Wage inequality typically grows over time among male workers of similar ages, mainly due to conditions given at the time of entering the labor market, including education levels. (Image credit: Kobiz Media/Korea Bizwire)
SEOUL, April 2 (Korea Bizwire) — Experts say that the reason why the gap between salary levels increases as employees get older is not because of labor productivity but because of an individual’s level of education at the time of initial employment.
Wage inequality typically grows over time among male workers of similar ages, mainly due to conditions given at the time of entering the labor market, including education levels, according to a report from the Korean Economic Association released on Wednesday.
The study used income data collected from 2002 to 2015 in the Korean Labor & Income Panel Study to measure the degree of income inequality between workers of similar age groups.
To secure enough samples, the researchers divided the age groups into five-year cohorts. Thus, those aged from 30 to 35 were placed in one group, while those aged 35 to 40 were placed in another group.
Based on a model developed in a prior study abroad, the researchers then divided the changes in labor productivity and conditions when entering the labor market.
Meanwhile, female workers were not subjects of the survey, as they could have experienced career breaks and seen their income slashed. The study solely focused on male workers.
According to the analysis, 67 percent wage inequality resulted from conditions when entering the labor market, including education level, and 33 percent was based on changes in labor productivity over one’s career.
The results indicate that conditions at the time of entering the labor market, such as education levels, account for two-thirds of the wage gap backdrop.
Even if employees start with a similar salary, wages are bound to grow apart over time, with this gap largely determined by their portfolio of qualifications built up before getting a job.
The report also confirmed that the income of office workers peaked when they were in their early 50s, and that the Gini coefficient, an indicator of income inequality, also showed an upward trend as age rose.
“Differences in educational background and other qualifications appear to be important when entering the labor market for the first time,” said Kim Ji-hoon, an assistant professor at Hongik University.
“In the case of those in low-income brackets, it could be difficult to enter university, and this could serve as an impediment to the accumulation of human capital.”
M. H. Lee (mhlee@koreabizwire.com)
