South Korea’s Ministry of Employment and Labor released a report last Thursday showing that South Koreans’ inflation-adjusted real wages have fallen by 5.5% since last year. Real wages fell for 10 consecutive months since April 2022 due to inflation.

The report also showed that full-time workers worked an average of 2.9 hours less compared to a year ago, resulting in falling wages. An official from the Ministry of Labor explained, “The nominal wage itself fell by 0.6%, and the inflation rate decreased by 5.2%, leading to a decrease in real wages.”

Why It Matters

The Ministry of Employment and Labor’s finding confirms that the current bout of inflation is driven by rising prices, not workers’ wages. Following the ministry’s report, the ruling People Power Party (PPP) and the government agreed to postpone raising utility bills amid high inflation trends and a slowing economy. However, PPP lawmaker Park Dae-chul said that an eventual hike in electricity and gas bills is inevitable. President Yoon Suk-yeol said in February that the government would freeze public utility fees, including highway tolls and postal and railroad fees, for the first half of this year.

The Bank of Korea (BOK) will also likely come under pressure to increase its policy rate again to tame inflation further and mitigate capital outflow. The U.S. Federal Reserve raised its key short-term interest rate by a quarter percentage point to 5% on March 22. The BOK has held interest rates steady at 3.5% since January.