Corporate Wage Burden Surges Due to COVID-19... Annual Salary Polarization Deepens

Hana Financial Management Research Institute 'Season of Wage Increases, Industry Temperature Differences' Report
Average Salary per Person During COVID-19 Period: 70 Million Won → 75 Million Won → 78 Million Won
Large Corporations Increased by Over 10%, but Small Businesses Only by 2%

[Asia Economy Reporter Sim Nayoung] During the COVID-19 period, the wage burden of domestic companies sharply increased. This was because the total number of employees decreased due to voluntary and involuntary resignations caused by social distancing measures immediately after the pandemic outbreak, while salaries continued to rise.

According to the report "The Season of Wage Increases, Temperature Differences by Industry" released on the 4th by Hana Financial Management Research Institute, the number of employees at domestic publicly audited companies (based on KOSPI-listed and KOSDAQ-registered corporations) decreased from about 1.6 million in 2019 to approximately 1.58 million in 2020, then increased again to around 1.65 million in 2021. During the same period, total salary amounts increased annually from about 110 trillion KRW to 120 trillion KRW and then to 129 trillion KRW.

Regardless of changes in the number of employees, the total salary amount increased, causing the average salary per person to rise sharply during the COVID-19 period (70 million KRW in 2019 → 75 million KRW in 2020 → 78 million KRW in 2021). Compared to the annual average increase of 1.5 million KRW over the four years before the pandemic, this was a rapid rise. The report explained that "labor shortages in certain industries such as IT led the wage increases." The ratio of wages to cost of goods sold also rose from about 11% in 2019 to approximately 13% in 2021, showing an increased labor cost burden after the pandemic.

By industry, companies such as Samsung Electronics in electrical and electronic manufacturing, Naver and Kakao in information services, and SM and Studio Dragon in content production and distribution led wage increases. Based on total employee salaries, Samsung Electronics, which enjoyed a semiconductor market boom at the time, raised labor costs by 20% year-over-year in both 2020 and 2021, while last year Naver and Kakao increased theirs by 45% and 77%, respectively.

While large corporations led wage increases, income polarization between large companies and small, fragile SMEs deepened. Looking at the wage increase rate per person by company size, large companies with over 1,000 employees saw a 10.7% year-over-year increase. Meanwhile, small companies with fewer than about 30 employees in 2019 had a wage increase rate of only 2.6%, deepening the rich-get-richer, poor-get-poorer phenomenon. In the case of small companies, wage increase rates were lower than those of large companies because they hired necessary personnel as non-regular workers.

As the economy worsened after the pandemic, industries with high potential wage burden risks are expected to increase their burden and reduce existing employees or new hires. Since 2018, hourly wages have risen above past trend lines due to minimum wage increases, and during the COVID-19 period, it was difficult to employ foreign workers, while transportation and delivery industries flourished, causing labor shortages and wage increases. The report forecasts that "business sectors with high labor concentration and burdensome labor cost expansion relative to growth potential, such as restaurants and pubs, real estate, construction, and rental businesses, will suffer significant damage" as the economy slows.

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