[Editorial] Starting Salaries Far Higher Than in Japan Only Raise Hiring Barriers

Starting salaries for new university graduates at large companies in Korea are significantly higher than in Japan and Taiwan, according to a recent survey. The Korea Employers Federation (KEF) analyzed 2024 wage statistics from the governments of Korea, Japan, and Taiwan using purchasing power parity (PPP) to reflect price levels. The results show that, regardless of company size, the overall average wage level in Korea is quite high. It is 24.5% higher than in Japan and 41.1% higher than in Taiwan.
The gap in starting salaries between Korea and Japan widens further as company size increases. For university graduates, Korea’s starting pay is about 20% higher than Japan’s at small firms and nearly 30% higher at mid-sized firms. At large corporations, the difference exceeds 40%. This raises the question of whether such wage levels are appropriate when considering the relative size of the economies and their productivity.
It is particularly noteworthy that Japan defines large corporations as global companies with 1,000 or more employees. The fact that starting salaries at these firms are well below those at Korean companies with 500 or more employees carries several implications.
A high starting point for wages at large companies is welcome news for workers, but if the level is excessive, many side effects follow. It can undermine corporate competitiveness and make it harder for the economy to escape low growth. It can also deepen polarization in the labor market by driving even more young people to focus solely on landing jobs at large corporations. According to KEF, the wage gap between large and small or mid-sized firms in Korea is more than twice that in Japan.
In Japan, starting salaries at large companies are only 14.3% higher than at small firms with fewer than 100 employees, whereas in Korea the gap is 33.4%. This suggests that young people in Japan are far less reluctant than their Korean counterparts to work for small and mid-sized companies. The comparison with Taiwan shows a similar pattern. It also means that Japan and Taiwan, which compete directly with Korea in key sectors such as semiconductors, are securing competitiveness with a much lower cost structure.
In Korea, wages at large companies and small or mid-sized firms diverge sharply from the outset, and the structure is such that this gap can only widen over time. A major reason is that Korea still relies heavily on seniority-based pay, under which wages automatically rise every year until retirement once a worker is hired. This is a different system from Japan and Taiwan, where wage structures are centered on job responsibilities and performance. If productivity rose in line with wage increases, overall costs could be offset, but that is not the case. Korea’s hourly labor productivity remains in the lower ranks among members of the Organisation for Economic Co-operation and Development (OECD).
When a high-cost, low-productivity structure becomes entrenched, dynamism across society fades. Large corporations, burdened by labor costs, raise the bar for hiring, and youth unemployment falls into a vicious cycle. Aversion to small and mid-sized firms only grows stronger, and more young people turn their backs on a reality that does not meet their expectations. This is one reason the number of young people who say they are "just taking a break" and doing nothing in particular is not declining.
Unions representing regular workers at large corporations need to rein in excessive wage demands and focus on boosting productivity. Above all, Korea must move quickly to introduce a rational wage system that allows compensation to match work performance. It is desirable to start from an appropriate wage level and then determine individual pay based on personal achievements. The solution to the gridlock in youth employment and the polarization between companies must be sought along this path.