Unpaid wages hit record high, affect over 150,000 workers

The government has estimated that unpaid wages surged about 27 percent in the first half year-on-year, hurting over 150,000 workers in South Korea and disrupting their livelihoods.

According to the Ministry of Employment and Labor on Thursday, back wages in the first half of this year reached 1.04 trillion won ($762 million), with a total of 150,503 affected workers. Compared to the same period last year, the amount of unpaid wages increased by 26.8 percent, and the number of affected workers grew by 14.1 percent.

This year’s unpaid wages in the first half of the year have already surpassed 1 trillion won, setting a new record for the period. Last year, the total amount reached a record high of 1.78 trillion won. If the current trend continues, this year’s total is projected to not only exceed last year’s record but also potentially surpass 2 trillion won for the first time.

By industry, unpaid wages have been particularly high in the manufacturing, construction and health care sectors. The manufacturing sector reported the highest amount of unpaid wages, reaching 287.2 billion won in the first half of the year.

In the construction sector, unpaid wages surged by 49.2 percent last year compared to the previous year. This upward trend continued into the first half of this year, with the amount of unpaid wages increasing by 26.0 percent, bringing the total to 247.8 billion won.

The health care sector also experienced a significant increase, with unpaid wages amounting to 71.7 billion won in the first half of the year, representing a 67.8 percent rise compared to the same period last year. The Ministry of Labor attributed this surge to unpaid wages in small-scale nursing homes and similar facilities impacted by the COVID-19 pandemic.

South Korea’s problem with unpaid wages is severe and notably worse than the US. According to the US Department of Labor, overdue wages in the US last year totaled $163.3 million, affecting over 208,000 workers across the US. In contrast, South Korea's overdue wages amounted to 1.7 trillion won last year, impacting over 300,000 people. Despite having a gross domestic product roughly one-fifteenth the size of the US, South Korea’s total overdue wages are approximately eight times greater than those in the US.

This issue most seriously impacts low-income workers, disrupting their daily lives. Many are forced to borrow money to cover expenses, leading to financial strain and reduced educational spending for their children, according to a Labor Ministry official.

The Ministry of Labor said Thursday that it had inspected approximately 12,000 workplaces, primarily in the construction sector, uncovering 39 billion won of overdue wages during the first half of the year.

According to the Labor Standards Act, a failure to make wage payments on time is punishable by up to three years in prison or a penalty of up to 30 million won.

This is in line with the Labor Ministry's "2024 Comprehensive Labor Inspection Plan," announced in January, which includes special inspections at workplaces where more than 50 employees are affected, unpaid wages exceed 1 billion won or where unpaid wages have caused significant social issues. Special inspections are comprehensive reviews typically conducted for businesses facing public criticism due to serious legal violations, such as workplace harassment or unfair labor practices.

Earlier in September, the government issued a warning about dealing with employers who habitually delay wage payments. Labor Minister Lee Jung-sik and then Justice Minister Han Dong-hoon stressed that timely salary payment is a basic right. They described wage delays as a crime against society that undermines labor values.

The ministers pledged strict measures, including possible detention during investigations, for "malicious" employers who conceal assets while delaying payments. They also announced that employers who intentionally delay even small amounts of wages would face formal indictment to challenge the notion that fines are a simple solution.

Additionally, a revised Labor Standards Act is currently under consideration in the National Assembly. The proposed changes include enhanced economic sanctions against habitual offenders, such as credit restrictions, limitations on government support and disadvantages in public bidding.