The income gap between large and small enterprises has become evident during the 1 to 3 years of tenure as age increases, according to a study.
The Korea SMEs & Startups Institute (KOSI) released a report on April 8 titled "Measures to activate the Tomorrow Savings Program by reducing the wage gap between large and small enterprises."
The study found that the average monthly income of workers in small enterprises continued to decrease compared to that of large enterprises, particularly as age increased up to the early 50s. This indicates that the wage gap between large and small enterprises widens as age increases. Notably, it decreased from 65.2% for those aged 20 to 29, to 49.4% for those aged 40 to 44, and to 42.4% for those aged 50 to 54.
The income stagnation of workers in small enterprises has led to a widening income gap with large enterprises. The average monthly income of small enterprise workers, based on the 20 to 29 age group, saw increases of 47.1% for those aged 35 to 39 and 52.0% for those aged 50 to 54, indicating that income has hardly risen from the late 30s to the early 50s.
During the same period, the income disparity between large and small enterprises by age expanded from 31.8 percentage points for those aged 35 to 39 to 81.6 percentage points for those aged 50 to 54.
Compared to the period of COVID-19, there were age groups where income growth had slowed. For those with less than one year of tenure, the figure increased by 2.9 percentage points from 69.5% in 2020 to 72.4% in 2023, suggesting that the gap has been alleviated during the recovery phase from COVID-19.
However, during the same period, the income share for those with 1 to 2 years of tenure decreased by 2.6 percentage points (from 67.1% to 64.5%), and for 2 to 3 years by 3.1 percentage points (from 65.1% to 62.0%), causing the income gap between large and small enterprises for workers with 1 to 3 years of tenure to widen.
The average monthly income of wage workers in small enterprises, compared to large enterprises, stood at 41.3% for those with 1 to 2 years of tenure, 49.3% for 2 to 3 years, and 57.3% for 3 to 5 years. In contrast, the income gap between large and small enterprises by years of tenure expanded from 17.5 percentage points for 1 to 2 years to 54.2 percentage points for those with 10 to 20 years, indicating that the income gap continues to widen up to 20 years.
As of the end of July this year, the Tomorrow Savings Program, which has been operated by the Ministry of SMEs and Startups since 2014 to help small enterprise workers with asset formation and saving for a lump sum, has recorded 111,374 participants from 41,552 companies. The participation rate was higher among small companies and in non-capital areas. In companies with fewer than 29 employees, 74,942 individuals participated from 34,823 companies, representing 83.8% of the total companies enrolled and 62.8% of the total participants.
Noh Min-seon, a research fellow at KOSI, noted that "46.7% of small enterprises have suffered operational damages due to the turnover of key personnel in the past three years," adding that "in an economic recession, the potential for increased income disparity and frequent outflow of key talent is significant."
He further added that measures should be taken to introduce the Tomorrow Savings Program for specialized personnel engaged in artificial intelligence (AI) jobs or holding master's or doctoral degrees, enhance the activation of a cooperative Tomorrow Savings Program between large and small enterprises, and strengthen the link between government support projects and the Tomorrow Savings Program.