S. Korea experiences the worst case of overdue wages

“Eradicating the issue of overdue wages is the essence of ensuring labor-management relationship governed by law,” Minister of Employment and Labor Lee Jung-sik and then-Minister of Justice Han Dong-hoon said in agreement on September 25 last year in a press room of the Government Complex Seoul. Four months passed since then. Have things gotten better?

According to the Ministry of Employment and Labor, the amount of overdue wages in South Korea is expected to have reached an all-time high last year. On the ground, more and more workers are complaining about the delayed payment of their wages since last year, especially in Bucheon, Gyeonggi Province, where small mold and component plants are concentrated. In particular, many female workers in their 50s and 60s who work at small-scale businesses with fewer than five employees and are not subject to the Labor Standards Act haven’t been paid for two to six months. A local labor consultant said she receives about 10 consultancy requests on average per day.

As those who experience overdue wages are mostly low-income workers, such an issue can disrupt the foundation of their normal daily lives. A sudden delay in salary payment means they would have to borrow money to pay expenses, fail to repay the loans, and reduce educational expenses for their children. The lives of both the workers and their families are significantly disrupted.

In the U.S., failing to pay wages on time is called ‘wage theft.’ It is addressed by a strong punishment, such as in the case of Minnesota, where habitual failure to pay wages on time may be punished by up to 20 years in prison.

According to the U.S. Department of Labor, the amount of overdue wages in the U.S. last year was 156.15 million dollars, and the number of victims was 135,067 last year. Meanwhile, South Korea would reach 1.7 trillion won in amount and over 300,000 victims last year. The country’s economic size based on GDP is 1/15 of the U.S., yet its amount of overdue wages is eight times larger than that of the U.S.

The causes of this issue can be easily guessed by listening to the voices on the ground. A labor inspector with authority as a judicial police officer investigates overdue wage cases. However, the cases are often treated as debt between individuals and not as crimes. “A lot of times, cases are closed as business owners flee and cannot be tracked, or victims are encouraged to agree with business owners by signing applications for non-punishment,” said a labor consultant. Delayed wage payment is a crime not prosecuted against objection. Victims cannot be punished if they do not wish punishment on perpetrators. “Wage payment delays increased since the clause of no punishment against objection was introduced in 2007,” said the civic group People's Solidarity for Participatory Democracy in its 2021 report. “Measures should be implemented to reduce labor inspectors’ excessive encouragement for agreement between labor and management.”

According to the Labor Standards Act, failure to make wage payments in a timely manner can be punished by up to three years in prison or a penalty of 30 million won or less. However, such cases rarely go to court; an actual penalty is about two million won on average. While unpaid wages should be received through civil suits, low-income workers who struggle to pay daily expenses find it difficult to pursue long-term lawsuits. It makes more financial sense for perpetrators to flee or hang in there as labor inspectors are unwilling to investigate, and punishment is far lower than overdue wages.

Perhaps due to its comment four months ago, the Ministry of Employment and Labor often announces that the minister is making efforts to eradicate overdue wages. The ministry praised itself in January last year, saying that the issue of overdue wages was quickly resolved by running a focus oversight period before the Lunar New Year. This year is also likely to see a similar announcement after a focus oversight period while, on the ground, more and more workers are finding themselves in desperate situations due to overdue wages.