The real wage (including social security benefits) has declined 2.3 percent during the five-year period from 2007 to 2012 in Korea. (image: 401(K)/flickr)
SEOUL, Korea, April 30, 2014 (Korea Bizwire) – A study shows that “wageless growth,” which is an economic phenomenon in which real wage goes down while labor productivity is increased, was most prominent in Korea among major developed economies.
According to a research report published by the Korea Institute of Finance “International Comparison on Wageless Recovery,” the real wage level and the real labor productivity of Korea remained similar to each other until the financial crisis in 2008, when the gap between the two indexes started to widen.
The real wage (including social security benefits), which is nominal wage adjusted for inflation, has declined 2.3 percent during the five-year period from 2007 to 2012, whereas it had increased during the years from 1997 to 2002 and from 2002 to 2007, by 19.4 percent and 17.6 percent respectively.
Among 28 OECD countries, there were 11 countries where their real wage levels plunged deeper than that of Korea from 2007 to 2012. Nevertheless, when the so-called PIIGS–Portugal, Italy, Ireland, Greece, and Spain–which have suffered a fiscal crisis recently and the 10 countries where per-capita GDP is ranked outside the top 40 in the world were excluded from the comparison, there were only three countries among 18–Britain, Japan, and Israel–which recorded a larger drop in real wage than Korea.
On the contrary, Korea’s real productivity of labor, which is GDP per worker, has been boosted by 9.8 percent during the same period. This was the highest growth in real labor productivity among the 18 countries.
Consequently, the disparity between the two figures was largest in Korea among the major countries that were subjected to comparison, as the labor productivity escalated most rapidly and the rate of real wage growth was among the slowest during the period.
The author of the report said, “Except for the countries that have gone through a severe financial crisis recently, Korea is in most critical wageless growth’ situation. Policies that will induce growth in real wages in accordance with labor productivity are urgently called for.”
Written by J. H. Kim (jhkim@koreabizwire.com)
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