SEOUL (Aug 4): Major South Korean firms are agreeing to the biggest pay rises in 19 years, according to a government survey, fueling concerns that a wage-price spiral is taking hold in the economy.

Salary agreements at companies with 100 workers or more climbed 5.3% in the first half of the year, exceeding every increase since 2003, a labour ministry poll of 3,600 firms released on Thursday showed.

Wage-push inflation is among key concerns of the Bank of Korea and President Yoon Suk Yeol’s administration, as it suggests a further step up in prices. With inflation already hovering near a 24-year high, a spike in salaries could threaten the economic outlook, which is already clouded by rising interest rates weighing on heavily indebted households.

Accelerating inflation is emboldening labour groups to seek higher pay, with some threatening strikes and disrupting business operations. Meanwhile, a wage-setting commission decided to raise next year’s minimum wage by 5%. Unemployment remains low in South Korea as consumption rebounds from the pandemic, providing workers with greater leverage in negotiations with employers.

While firms of at least 100 workers account for only a quarter of the labour force, according to statistics office data, the government is particularly concerned that pay increases this year at bigger companies will drive an income-inflation spiral.