The proportion of young South Koreans working at small and medium-sized businesses has plummeted. (Image courtesy of Yonhap)
SEOUL, Apr. 23 (Korea Bizwire) – The proportion of young South Koreans working at small and medium-sized businesses has plummeted, statistics show, as a gaping wage divide drives talented graduates to seek jobs at the country’s major conglomerates.
Government figures illustrate the stark disparities separating the working conditions at South Korea’s small enterprises from those at its corporate titans. The average monthly pay for employees at big businesses was 5.91 million won last year, more than double the 2.86 million won average at smaller firms, according to data from Statistics Korea.
The pay gap widens as workers age. Among those in their 20s, big-company salaries averaged 3.4 million won, only 1.6 times higher than at small businesses. But for employees in their 50s, the big-firm premium soared to 2.4 times, with an average salary of 7.68 million won compared with 3.16 million won at smaller workplaces.
Beyond pay, the family-friendly policies and benefits at major corporations far outpace those of smaller employers. While 95.1 percent of companies with 300 or more workers allowed all who qualified to take parental leave, the figure was just 47.8 percent at businesses with five to nine employees, a survey by the Korean Women’s Development Institute found.
Entitlements like leave for spouses after childbirth and reduced hours during child-rearing years showed a similar corporate-size divide. At companies with 300-plus workers, 84.1 percent said spouses could take full leave, compared with 57.9 percent of the smallest businesses. Allowing shorter workweeks for employees caring for young children was permitted at 83.5 percent of major corporations but only 54.8 percent of smaller firms.
With young, educated South Koreans increasingly shunning the lower compensation and scant family benefits of small businesses, those enterprises face dire labor shortages — and a rising reliance on temporary foreign workers to fill the gaps. This year, the government raised its annual cap on such workers to a record 165,000. But employers’ groups say even more visas for overseas hires are needed.
According to a survey of 1,200 small manufacturers by the Korea Federation of SMEs, 29.7 percent of respondents said this year’s increase was still insufficient to meet demand. The federation estimated a further 35,000 foreign workers are required beyond the 2024 quota, chiefly skilled technicians rather than unskilled labor.
Experts say to lure young talent, small companies must convince ambitious graduates they offer a viable path to attaining wealth and success — pointing to the rise of start-ups that achieved coveted “unicorn” status as listed firms valued over $1 billion.
“Young people need to dream of growing together with a small business,” said Noh Min-seon, a researcher at the Korea Small Business Institute, adding that improved compensation, housing aid and family benefits are also crucial to recruiting graduates.
Rather than thinly spreading government support across a multitude of tiny firms, Kim Doseong, dean of the business school at Sogang University, said more forceful policies should concentrate resources on promising upstarts poised to become major players, thereby inspiring youth with real-world success stories of humble beginnings.
“If they see more small firms blossom into medium-sized champions or even globally competitive innovators valued over $1 billion, the younger generation may take greater interest,” said Kim, who also leads the Korean Academy of SME and Start-up Policy Initiative.
To further improve working conditions, some experts advocate expanding incentives tied to government certification as a “family-friendly workplace” — a coveted status that aids employee recruiting. Jeon Ki-taek, a senior researcher at the Korean Women’s Development Institute, suggested businesses could collectively institute new forms of bonus pay when employees use parental leave policies.
Beginning in July, the government plans to offer monthly subsidies of up to 200,000 won to small employers who compensate staff members covering duties for colleagues on parental leave — a step Jeon said the private sector could build upon.
“It’s worth considering making such allowances a universal reality across companies,” Jeon said, “beyond just the government incentives.”
M. H. Lee (mhlee@koreabizwire.com)
