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Study on a “Fair Wage System” in Korea’s Labor Market
Study on a “Fair Wage System” in Korea’s Labor Market
  • Table of Contents

    Chapter 1. Introduction (Kyetaik Oh, Jeongkoo Yoon)

    Chapter 2. Analysis of Survey Results on Fairness of Wage (Kyetaik Oh)

    Chapter 3. Infrastructure for Fair Wages (Donghoon Yang)

    Chapter 4. Conclusion and Policy Suggestions (Kyetaik Oh)

     

  • SUMMARY

    This study examines the status of wage systems of Korean firms, analyzes what a worker perceives to be a fair wage, and discusses the directions in which the current wage system needs to be reformed in the future. As interest in fairness has recently increased in Korean society, interest in the fairness of wages has also been high. However, there is still a lack of understanding as to what kind of wages are perceived by workers as a fair wage. In order to operate a fair wage system, it is a prerequisite to know which wage system is perceived as a fair wage system by workers. Therefore, this study attempted to find out what constitutes a fair wage in the minds of workers. To that end, the wage fairness model and various theories on the wage system and wage fairness were examined. Also, the three components of wage—the wage level, the wage system, and the wage type—were systematically explored so that a clear picture of a fair wage system can be obtained.

    Chapter 2 analyzes the wage fairness survey results. In order to analyze the current status of wage systems and the perception of workers toward wage fairness, a total of 214 companies and 722 workers working in these companies were surveyed. The sample was composed of firms with 100 or more employees in 7 different industries, and the firms and their workers were matched so that the wage system of a particular company and the perception of a fair wage felt by its workers could be linked and analyzed. To analyze the wage system, various factors such as the wage composition, the status of base pay and bonus, as well the opinions of HR personnel regarding the direction of changes in the wage system were closely examined. In order to analyze the perception of workers toward wage fairness, the following factors were analyzed: the determinants of remuneration, the appropriateness of remuneration, the satisfaction level on remuneration, the wage gap within the same rank and between different ranks, the automatic wage increase, the salary level of new employees as compared to that of managers, the wage gap among those who joined the firm at the same time, the acceptability of the wage gap, and the proportion of performance-based pay. To identify the perception of workers toward a fair wage more thoroughly, an in-depth analysis of the perception toward wage fairness in different groups—based on the salary level of new employees as compared to that of managers, the proportion of a fixed pay, or the preference of the wage gap—were carried out.

    Chapter 3 analyzes the infrastructure to implement a fair wage system. When individual organization is to improve their wage fairness, four types of infrastructure should be established: laws prohibiting unreasonable wage discrimination; supervisory bodies against wage discrimination; wage information infrastructure; and job information infrastructure. In particular, when the wage information infrastructure within society is developed, organizations can reduce the information gaps needed to comply with the principle of equal pay for equal work. At present, there exist insufficient wage standards for different occupational categories and job types in Korea, so the wage gap between different occupational categories and job types can be unreasonably big. This study attempted to explore the actual situations regarding a fair wage infrastructure in several western countries including the US, the UK, and Germany. Also, it analyzed what wage infrastructures are provided by private agencies and governments to enterprises to support the establishment of a fair wage system. For this purpose, first, the contents of laws and regulations prohibiting wage discrimination and the activities of supervisory agencies were examined. Next, how the standardized job information and wage information are provided to individual organization to ensure the internal and external fairness of wages in the western countries was analyzed. By studying the cases of fair wage legislation as well as recent changes in such countries as the US, the UK, Germany and Iceland, it is confirmed that, going beyond controlling individual wage discrimination, these countries have tightened the information disclosure requirements on the wage system. In order to make the fair wage law more concrete and enforce it in practice, supervisory bodies should perform the actual monitoring functions. In this regard, supervisory bodies such as the EEOC of the US and the EHRC of the UK play the role of investigating wage discriminations and providing support for legal actions, thus contributing to enhancing the effectiveness of the fair wage law. The wage information infrastructure in the US has been standardized at the public and private levels by sector, industry, region, and job type. In contrast, the UK and Germany use wages that have been agreed through bargaining between labor unions and employers as their standard wages instead of relying on market surveys. The UK determines the wage level based on job evaluation when it decides on government contract wages for the public sector including local governments, and Germany also standardizes wages based on job evaluation at the industry level such as in the case of the metal industry. On the other hand, since the US has a low unionization rate, instead of using wages that have been agreed through labor-management negotiations, it relies on the market-based wage infrastructure by investigating market wages and using them when determining the wage level.

    In conclusion, it was found that the wage systems of Korean firms and the perception of workers toward a fair wage system were diverse. In particular, various wage systems are being operated according to different characteristics of companies, jobs, and workers, and the perception toward a fair wage varies. Considering a strong preference for a comprehensive pay system and diverse forms of wage systems and diverse preferences for a fair wage among workers, it would be more practical to think about how to operate various wage systems rather than how to reform the current systems into a single wage system. If there is a preference for a particular wage system, research is required on how to implement it. If many workers view a job-based wage system as a fair wage system and prefer it, an infrastructure that can operate a job-based wage system needs to be established. To that end, it would be necessary to build a job information infrastructure and a wage information infrastructure.

     

Kyetaik Oh's other publications : 7
{Research Series} posts
No Title Author Date Attach
7 Policies for Workplace Innovation Kyetaik Oh, Seong-Jae Cho, Dongbae Kim, Yongjin Nho, Joohwan Lim, Moonho Lee, Seung Gook Jung December 28, 2018 Policies for Workplace Innovation
6 Development of Job Evaluation Tools by Industry: Analyzing Case Studies Kyetaik Oh, Gyu Chang Yu, Hye Jung Lee, Sang Hoon Lim December 28, 2018 Development of Job Evaluation Tools by Industry: Analyzing Case Studies
5 Study on a “Fair Wage System” in Korea’s Labor Market Kyetaik Oh, Jeongkoo Yoon, Donghoon Yang December 28, 2018 Study on a “Fair Wage System” in Korea’s Labor Market
4 Developing Industry-level Job Evaluation Tools: Public Service and Social Welfare Service Industries Kyetaik Oh, Gyu Chang Yu, Hye-Jeong Lee, Min-Kyung Ju, Mi-So Yoon December 29, 2017 Developing Industry-level Job Evaluation Tools: Public Service and Social Welfare Service Industries
3 HR Management Practices in Response to Changes in the Labor Market Environments such as Retirement Age Extension Kyetaik Oh, Dong-Gwan Jung, WooSung Park, Sangmin Lee December 30, 2016 HR Management Practices in Response to Changes in the Labor Market Environments such as Retirement Age Extension
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