A striking wage gap has emerged in South Korea, with graduates from the top 20% of universities earning up to 50% more than those from the bottom 20%. (Image courtesy of Yonhap)
SEJONG, Feb. 28 (Korea Bizwire) – A striking wage gap has emerged in South Korea, with graduates from the top 20% of universities earning up to 50% more than those from the bottom 20%.
This significant disparity is fueling intense competition for university admissions, contributing to social issues such as low birth rates and regional imbalances, according to a recent analysis by a national policy research institute.
The Korea Development Institute (KDI), under the guidance of Chief Economist Koh Young-sun, shed light on this issue in a recent publication.
The study highlights South Korea’s position at the bottom among 32 OECD countries, with large corporations (employing over 250 people) accounting for only 14% of all jobs, a stark contrast to countries like Germany (41%), Sweden (44%), the U.K. (46%), France (47%), and the U.S. (58%).
Further data from Statistics Korea in 2021 show that large businesses with 300 or more employees account for 13.8% of all workers and 18.4% of wage earners. In contrast, smaller businesses with fewer than 10 employees represent 45.6% of the workforce and 30.7% of wage earners.
Notably, wages in businesses with five to nine employees are only 54% of those in companies with over 300 employees, and those in businesses with 100 to 299 employees earn 71% of their larger counterparts.
The scarcity of jobs in large corporations is identified as a contributing factor to the fierce competition for university admissions. The wage gap between top-tier and lower-tier university graduates underscores the pressure on students to secure places in prestigious institutions.
The KDI’s research, which categorized general university graduates into quintiles based on their college entrance exam scores, found that the wage premium for graduates from the top quintile (top 20%) compared to the bottom quintile (bottom 20%) increased with age, peaking at 51% for those in their early forties.
The study also pointed out the advantages that top-tier university graduates enjoy, such as higher rates of regular employment, opportunities in large corporations, and longer tenure.
Additionally, the lack of large corporation jobs is linked to challenges in utilizing maternity leave and parental leave policies in smaller companies, potentially contributing to the country’s low birth rate.
A survey by the Ministry of Gender Equality and Family last year revealed that the quality of jobs tends to decline after career interruptions, with a significant drop in regular employment and an increase in temporary positions and self-employment.
Koh emphasized that the concentration of jobs in the capital region is also a result of the relative scarcity of large corporation jobs outside the metropolitan area.
Regression analysis showed a correlation between company size and labor productivity at the provincial level, indicating the need for more large corporation jobs and policy reforms to encourage corporate scaling.
The study suggests reevaluating the effectiveness of policies aimed at supporting small and medium-sized enterprises (SMEs) and revisiting regulations related to large corporations to enhance social mobility, increase employment rates among women, boost birth rates, and promote regional development.
Koh stressed that addressing these societal challenges requires more than just individual policy efforts; a strategic focus on scaling up businesses is essential.
M. H. Lee (mhlee@koreabizwire.com)
