"Wages in Small and Medium Enterprises at 60% of Large Corporations... Gap Widens Over 20 Years"

Analysis of Changes in Wage Gap Between Large and Small-Medium Enterprises Over the Past 20 Years
Worsened by 12.3 Percentage Points Compared to 1999
Smaller Workforce Faces More Challenges... "Need to Explore Long-Term Employment Solutions"

Asia Economy DB=Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Bo-kyung] It has been revealed that the labor market gap between workers in large and small-to-medium enterprises (SMEs) has deepened over the past 20 years in terms of wages, age, and length of service.

The Korea Small Business Institute announced on the 14th a report titled "Analysis of Changes in Labor Market Gaps between Large and Small-to-Medium Enterprises (1999~2019)" containing these findings.

According to the report, as of 2019, the average wage in SMEs (3,377,000 KRW) was 59.4% of the average wage in large enterprises with 500 or more employees (5,690,000 KRW). This means that if the large enterprise wage is set at 100, the SME wage is 59.4. This figure is 12.3 percentage points lower than the large-SME average wage ratio of 71.7% in 1999.

Over the 20 years, the average wage in SMEs increased by 4.5% annually on average, while the average wage in large enterprises rose by 5.5%.

The smaller the number of employees in an SME, the larger the wage gap compared to large enterprises. SMEs with 5 to 9 employees had an average wage at 50.2% of large enterprises, those with 10 to 99 employees at 58.2%, and those with 100 to 499 employees at 70.3%.

Wage Gap Between Large, Medium, and Small Enterprises by Year

However, after peaking at 53.1% in 2015, the large-SME average wage ratio has been on the rise recently. The institute evaluated that "government long-term employment support policies for SMEs, such as the Tomorrow Filling Deduction, have had some effect."

The difference between large enterprises and SMEs was also notable in terms of workers' average age and length of service.

In 2019, the average age of SME workers was 43.1 years, which was 3.6 years higher than that of large enterprises with 500 or more employees (39.5 years). This is an increase of 2.0 years compared to the average age gap of 1.6 years between large and SMEs in 1999.

Over the past 20 years, the average age of SME workers increased from 36.2 years (1999) to 43.1 years (2019), a rise of 6.9 years.

The smaller the SME, the higher the average age. For SMEs with 5 to 9 employees (44.5 years), the average age was 5.0 years higher than that of large enterprises. For those with 10 to 99 employees (43.4 years), it was 3.9 years higher, and for those with 100 to 499 employees (41.4 years), it was 1.9 years higher than large enterprises.

Average Age by Company Size

In 2019, the average length of service for SME workers was 6.0 years, which was 4.7 years shorter than that of large enterprises (10.7 years). This gap widened by 1.5 years compared to the 3.2-year difference in 1999.

The average length of service for SME workers increased by 0.9 years from 5.1 years (1999) to 6.0 years (2019). During the same period, the average length of service for large enterprise workers increased by 2.4 years from 8.3 years to 10.7 years.

Nominsun, head of the Future Strategy Research Group at the Korea Small Business Institute, said, "Due to the spread of COVID-19, SMEs' capacity to invest in their employees has significantly decreased," adding, "It is necessary to explore various policy measures to promote wage increases and long-term employment for SME workers."

He proposed the following key policy tasks: ▲ promoting performance sharing between SME business owners and workers ▲ expanding growth paths for high school graduate employment (or prospective employment) in SMEs ▲ increasing participation of youth and women in technology-based innovative jobs.

This content was produced with the assistance of AI translation services.