Exhibit: Average Annual Corporate Business Operating Profit and Wage Growth
Source: “Household Income Status and Implications,” Kim Young-tae and Park Jin-ho, Bank of Korea Issue Paper Series No. 2013-1, January 14, 2013. Page 4 of 12.Given the atmosphere in Korea lately, I wouldn’t be surprised if some policymakers used this as ammunition to revive efforts to break up the country’s mega-conglomerates, known as chaebol—this data indicates the chaebols’ success is trickling down to workers more slowly.
I have a different take though—I think this chart underscores the need for Korea to drop its remaining protectionist barriers. Right now, because a few chaebol dominate Korea’s economy, there’s not much competition for workers, which gives businesses less incentive to offer higher wages and salaries. This is even more pronounced today than it was during the 1990s since some of the chaebol collapsed in Korea’s 1997 financial crisis, further lowering competition. If Korea dropped more trade barriers though, more foreign firms would likely establish Korean offices, giving Korean people more employment options. Foreign and domestic businesses alike would have to compete for talent through higher wages and salaries, and all Korean workers would benefit.