South Korean real wages decline for third consecutive month

South Korean workers are experiencing a squeeze on their purchasing power as real wages have declined for three consecutive months. This marks the first time since 2023 that workers have seen a sustained drop in their real income over such a period.

According to the Ministry of Employment and Labor's July survey of businesses, the average nominal wage per employee in businesses with one or more regular employees increased by 3.1% year-on-year to 4.094 million won. However, when adjusted for inflation, the real wage per employee fell by 0.1% to 3.412 million won in June, compared to 3.414 million won in the same month last year. This follows decreases of 1% in April and 1.4% in May.

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Real wages have recorded a negative figure because the inflation rate has outpaced the modest wage increase.

Jeong Hyang-sook, head of the Labor Market Analysis Division at the Ministry of Labor, explained the situation during a briefing. "Real wages have recorded a negative figure because the inflation rate has outpaced the modest wage increase," she stated. Jeong attributed the current economic climate to a "triple-high" situation involving high oil prices, high inflation, and high exchange rates. She noted that the current inflation rate, around 3%, is the highest since 2022 when it reached 6%.

Looking ahead, a significant rebound in real wages appears unlikely in the short term. While specific figures for July are still being finalized, Jeong projected that if wage growth remains around 3% while the inflation rate hovers near 2.8%, the net change in real wages would likely remain within the 0% range. The longest period of consecutive real wage decline occurred from April 2022 to January 2023, lasting 10 months, during a period of heightened inflation driven by the COVID-19 pandemic and the war in Ukraine.

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The current inflation rate, around 3%, is the highest since 2022 when it reached 6%.