Real wages for workers have fallen for three consecutive months, a trend not seen since 2023, as rising prices outpace nominal wage increases. While the total number of employed individuals grew over the past year, a significant portion of this growth is attributed to temporary positions, according to recent labor statistics.
Declining Real Wages Amidst Inflationary Pressures
In July, the average monthly earnings for employees in businesses with one or more workers stood at 4,094,000 won, an increase of 123,000 won (3.1%) compared to the same month last year. However, when adjusted for inflation, the real wage saw a slight decrease.
Nominal wages for permanent employees rose by 3.6% to 4,375,000 won, while temporary workers saw a 3.8% increase, earning 1,773,000 won per month. The rise in permanent employee wages was partly influenced by increased bonuses in sectors like semiconductor manufacturing and performance-based pay.
Despite these nominal gains, the real wage, which accounts for the rising cost of living, fell to 3,412,000 won in July. This represents a decrease of 2,000 won (0.1%) from the previous year. This marks the third consecutive month of decline in real wages, following a 1.0% drop in April and a 1.4% decrease in May.
The last time real wages experienced such a prolonged decline was in 2023, when they fell for five consecutive months from April to August. Labor officials attribute this trend to the current high inflation rate, which has surpassed the rate of wage increases.
Jeong Hyang-sook, head of the Labor Market Research Division at the Ministry of Employment and Labor, explained, “The inflation rate has been at its highest level since 2022. Because the inflation rate is higher than the average wage increase rate, real wages are showing a negative trend.”
Even when looking at the second quarter alone, the average nominal monthly wage per worker was 4,036,000 won, a 2.1% increase year-on-year. However, the real wage for the same period decreased by 0.8% to 3,370,000 won.
Despite the recent quarterly decline, the average real wage for the first half of the year was 3,606,000 won, showing a slight increase of 0.3% compared to the first half of the previous year.
Employment Growth Driven by Temporary Positions
The total number of employed individuals in businesses with one or more employees reached 20,718,000 as of the end of July, an increase of 226,000 (1.1%) compared to the same period last year. This growth, however, was largely concentrated in temporary employment.
Permanent employees increased by 78,000 (0.5%) to 17,280,000. In contrast, temporary workers saw a substantial rise of 147,000 (7.6%), reaching 2,071,000. Other employment categories also saw a marginal increase of 1,000 (0.1%).
Crucially, temporary workers accounted for approximately 65% of the total employment increase of 226,000 individuals.
“When employment recovers, temporary positions tend to increase first, followed by permanent positions as the labor market and economic conditions improve,” stated Jeong. “This pattern is considered normal.”
Sectoral Employment Trends
By industry, the healthcare and social work services sector saw the largest increase in employment, adding 119,000 jobs. The finance and insurance sector grew by 27,000 jobs, and professional, scientific, and technical services increased by 25,000 jobs.
The manufacturing sector continued its growth streak for the seventh consecutive month, adding 14,000 jobs in July. The pace of this growth has been accelerating, with increases of 3,000 in April, 7,000 in May, 12,000 in June, and 14,000 in July. This includes a 5,000-job increase in the manufacturing of electronic components, computers, visual and audio equipment, and communication apparatus, which includes semiconductors.
The construction sector also saw an increase for the second consecutive month, adding 3,000 jobs. However, this recent growth is modest compared to the significant decline of 72,000 jobs recorded in July of the previous year, with recent increases hovering between 3,000 and 7,000.
Conversely, wholesale and retail trade experienced a decline of 28,000 jobs, marking the 28th consecutive month of decrease. The Ministry of Employment and Labor attributes this decline partly to the closure of large supermarkets and retail outlets.
Labor Mobility and Job Transitions
In July, the number of people entering employment increased significantly by 177,000 (18.3%) year-on-year, reaching 1,143,000. Similarly, the number of people leaving employment rose by 178,000 (18.8%) to 1,127,000.
Within those leaving employment, non-voluntary departures increased by 131,000 (24.3%) compared to the previous year, totaling 669,000. Jeong noted that non-voluntary departures are typically dominated by temporary workers, who often leave jobs due to the expiration of their contracts, with less impact from structural economic changes.
The persistent decline in real wages, coupled with a job market increasingly reliant on temporary positions, highlights the ongoing economic challenges faced by workers. While overall employment numbers show an increase, the quality and stability of these jobs remain a key concern as inflation continues to erode purchasing power.
