The impact of labor market conditions on wage growth in major economies [BOK Issue Note 2023-12]

BOK Issue Note
labor market wage growth major economies Korea US
Research Department(02-759-4434)

Labor markets in major economies including Korea have commonly been bouncing back in resilient force in the post-pandemic recovery period. Nevertheless, a closer look sheds heterogeneous features in labor demand-supply conditions across countries. This paper examines how different labor market conditions in major economies affect their wage and inflation pressure.

Compared with other major economies, secular constraints on labor supply in Korea have been limited. The upward wage pressure in the US owes to the secular decline in labor supply that has been in continuation before the pandemic. However, in Korea, despite the faster aging, labor supply has been increasing with greater participation of senior or female population.

On top of that, labor demand in the service sector, which takes up a larger share of employment, has been mild, refraining tightness in labor market from having a meaningful impact on wage and price increase in Korea. 

Overall, labor market pressure for wage and price has been milder in Korea compared with the US and other major countries.

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