Wage gap between big businesses and smaller firms hits record high

A job seeker looks at a job information board in Mapo District, Seoul, Feb. 11. Yonhap

The wage gap between large conglomerates and small and medium-sized enterprises (SMEs) widened to a record high in Korea, fueling concerns about widening income disparities across the workforce and a growing reluctance among job seekers to join smaller firms.

According to the Ministry of Data and Statistics, workers at small and medium-size enterprises earned an average of 3.07 million won ($2,125) a month in 2024, compared to 6.13 million won at large corporations. The overall average monthly income across all workers was 3.75 million won, up 3.3 percent from a year earlier.

In Korea, a company’s size is defined by its sales and total assets. A firm qualifies as an SME if its three-year average sales fall within industry-specific thresholds and its total assets are below 500 billion won. Large corporations, in contrast, are those with combined assets of 10 trillion won or more and are designated as business groups subject to cross-shareholding restrictions.

The data covered about 20.94 million jobs enrolled in social insurance programs and occupational pensions for public officials, with the remaining roughly 370,000 estimated using sample data from the National Tax Service.

Income growth at large corporations stood at 3.3 percent, exceeding the 3 percent gain at SMEs for only the second time since the government began compiling the data in 2016, the first being in 2021.

The widening wage gap between SMEs and large corporations makes it harder for smaller firms to attract job seekers.

Job seekers wait for recruitment consultations and interviews at a job fair in Gangnam District, Seoul, Jan. 11. Yonhap

A ministry survey last year of about 34,000 people ages 13 to 34 found that 28.7 percent favored large corporations as employers, the highest share since 2006.

Meanwhile, a 2024 Korea Employment Information Service (KEIS) survey of 1,014 SMEs found their average hiring difficulty score for workers ages 20 to 34 rose to 3.66 out of 5, up 0.39 points from two years earlier. More than half, 53.2 percent, cited a shortage of job seekers as the main difficulty in hiring young workers.

In a separate 2024 KEIS nationwide survey of 4,001 people ages 19 to 34 with work experience, 87 percent said company size would not matter if wages and benefits were strong, suggesting job seekers could turn to smaller firms if pay becomes comparable.

The wage gap widened with age, with workers in their 50s at large companies earning 7.97 million won a month, more than 2.3 times the 3.41 million won at small and medium-sized enterprises.

Across income brackets, the largest share of workers, 20.9 percent, earned between 1.5 million won and 2.5 million won a month, followed by 20.1 percent earning between 2.5 million won and 3.5 million won, while 12.2 percent made less than 850,000 won.

Across industries, finance and insurance posted the highest average monthly income at 7.77 million won, followed by electricity, gas and steam supply at 6.99 million won and international and foreign organizations at 5.38 million won.

At the lower end, accommodation and food services averaged 1.88 million won a month, followed by membership organizations and other personal services at 2.29 million won.

Experts said the widening gap reflects an industrial structure in which many SMEs depend on large corporations.

“Large companies are typically global exporters, while most smaller firms supply to them rather than export directly,” said Kim Sung-hee, a professor at Korea University’s Graduate School of Labor Studies. “Lacking pricing power as final sellers, they must accept terms set by larger firms, widening the structural gap over time.”

Kim added that jobs at large corporations make up only about 10 percent of total employment in Korea, as many firms outsource much of their workforce to SMEs instead of hiring directly.

“To address the problem, large corporations need to expand direct hiring,” Kim said, adding that major firms should bear greater responsibility for shifting positions they could hire directly to smaller subcontractors.