Korea Institute for Industrial Economics and Trade releases report Sunday

"Youth policy must subsidize real wages at small and medium-sized enterprises"

A job posting board at a university employment center in Seoul. [Yonhap]
A job posting board at a university employment center in Seoul. [Yonhap]

By Yang Geun-hyuk, The Herald Business

The wage gap between large corporations and small and medium-sized enterprises is delaying young people's entry into the labor market, according to a new analysis.

The Korea Institute for Industrial Economics and Trade laid out the findings Sunday in a report titled "The Dual Structure of the Labor Market and Youth Employment: Focusing on the Wage Gap Between Large Corporations and SMEs."

Drawing on employment activity statistical registers to conduct a full census of salaried workers aged 15 to 64 with income, the report found that the average monthly wage at SMEs stood at 3.51 million won ($2,270) in 2024 — roughly half the 7.16 million won paid at large firms.

In real terms, the ratio of SME wages to large-firm wages improved from 0.43 in 2015 to 0.49 in 2024, but the nominal gap widened over the same period, from 2.98 million won to 3.65 million won.

Citing the recent distribution of performance bonuses in the semiconductor industry as an example, the report said the growing nominal wage gap has made landing a job at a large firm increasingly consequential.

The gap widens more sharply as seniority accumulates. The report found that joining a large firm rather than an SME translates into a lifetime earnings advantage of more than 1 billion won ($647,000).

Moving from an SME to a large firm after initial employment has also become progressively harder.

Workers at SMEs change jobs at more than twice the rate of those at large firms, but most moves are to other SMEs. Even among workers in their 20s — the group with the highest job mobility — only 5 to 6 percent of moves were from an SME to a large firm.

The report concluded that young people are postponing labor market entry in response to the widening wage gap and the difficulty of moving up through job changes.

Based on the 2024 large firm–SME wage gap, four-year university graduates delay graduation by about one month and defer entering the labor market by about 3.6 months due to the dual structure of the labor market.


yg@heraldcorp.com