The Korean Economic Forum
Functional Income Distribution in Korea: Labor Productivity, Wages, and Labor Income Share
Nak Nyeon Kim (Dongguk University)Year 2023Vol. 16No. 2
This article reviews the debates (Park Jongkyu, 2013; Park Jungsoo, 2019; Kim Yu Seon, 2019; Joo Sangyong and Jeon Su Min, 2019; Lee Kang-Kook, 2019; Park Jeong-soo, 2020) surrounding labor productivity, wages, and labor share in Korea. Self-employment is important in this debate. However, previous studies omitted quasi-corporations from the scope of self-employment income and included operating surplus of housing unrelated to self-employment, but this is corrected here. And while it has been argued that the gap between real GDP per employed person and real wage per worker (divided by consumer price index) has widened significantly since the financial crisis (1997) or the global financial crisis (2008), such gap disappears when labor productivity and real wages are compared on a consistent basis. Looking back to 1975, periods in which real wage growth was faster than labor productivity alternated between 1987 (democratization), 1997 (financial crisis), and 2010, respectively. The average rate of increase of both over the entire period was balanced. Reflecting this trend, the labor income share also rose, then fell, and recently turned to rise again. This trend in the labor income share explains well the trend of the top income share relatively well, but it is found to have poor explanatory power in the income distribution index including the wider class.