[Exclusive] Construction Industry Wage Arrears Total 1.6 Trillion Won Over 5 Years... Surge of 49% Last Year Due to Economic Downturn

Increase in Construction Wage Arrears in 2022-2023
Surges Outpacing Overall Wage Arrears Growth

Number of Victims Rises Amid Construction Market Slump
Reached 90,000 Last Year... Returning to 2019 Levels

"Construction Market Expected to Remain Negative Until Next Year"
Government Response Needed to Alleviate Wage Arrears Concerns

It has been revealed that wage arrears amounting to 1.6 trillion KRW have occurred in the construction industry over the past five years. Since 2022, the amount of unpaid wages has shown a marked increase, with the growth rate soaring to 49% last year due to the downturn in the construction market. As the construction market downturn is expected to continue until next year, active government measures are required regarding wage arrears.

According to the "Annual and Industry-specific Wage Arrears Status" data received by Lee Su-jin, a member of the Democratic Party of Korea, from the Ministry of Employment and Labor on the 10th, the scale of wage arrears in the construction industry reached a total of 1.585 trillion KRW from 2019 to last year. The number of victims who experienced wage arrears over the past five years reached 402,584 people.

The scale of wage arrears in the construction industry decreased annually from 2019 (316.8 billion KRW), 2020 (277.9 billion KRW), to 2021 (261.5 billion KRW). However, starting from 2022 (292.5 billion KRW), when the construction market worsened, it shifted to an increasing trend. In particular, last year, as the construction market downturn became more pronounced, the scale of wage arrears also surged, reaching 436.3 billion KRW.

This increase was faster than the overall annual growth rate of total wage arrears. In 2022, while the total wage arrears (1.3472 trillion KRW) decreased by 0.24% compared to the previous year, wage arrears in the construction industry increased by 11.85%. Last year, while total wage arrears (1.7845 trillion KRW) increased by 32.46%, wage arrears in the construction industry surged by 49.16%, showing a difference of over 16 percentage points.

As the amount of wage arrears in the construction industry increased, the number of related victims also rose. From 2019 (91,232 people), 2020 (75,336 people), and 2021 (68,843 people), the numbers seemed to decrease, but in 2022 (73,646 people) and last year (93,527 people), they increased again, swelling to the 90,000 level. This figure far exceeds the number of victims in the manufacturing industry (57,389 people), which had the highest wage arrears last year.

The seriousness of wage arrears in the construction industry was also clearly reflected in the "2024 Comprehensive Living Conditions Survey of Construction Workers" released last month by the Construction Workers Mutual Aid Association. When asked whether they had experienced delayed wage payments within the past year, 29.5% of all respondents (1,319 people) answered "yes." This is a 5.0 percentage point increase from the 24.5% response rate in the same survey in 2022. The response indicating anxiety about wage arrears also rose by 5.6 percentage points to 22.5% compared to 16.9% in 2022.

The problem is that the likelihood of wage arrears improving in the short term is low. According to the Statistics Korea's Industrial Activity Trends, construction output (the amount converted into monetary value of construction performance) has been declining compared to the same month of the previous year. Following May (-3.2%), June (-6.0%), July (-5.2%), and August (-9.0%) saw the decline deepen. A recent Statistics Korea survey also showed that the number of construction workers among total employed persons decreased the most in the first half of the year.

Experts forecast that the construction market downturn will continue until next year. Park Seon-gu, head of the Economic and Financial Research Office at the Korea Construction Policy Research Institute, said, "The construction market will be at its worst from the second half of this year through the first half of next year," adding, "Everyone is expecting negative growth until next year." This means concerns about wage arrears in the industry are likely to persist, which is why there are calls for the government to present more proactive countermeasures.

The government has already introduced job support measures for the construction industry in August to address problems caused by the construction downturn. The Ministry of Employment and Labor recently strengthened on-site labor inspections to improve wage arrears in major industries, including construction. This month, the National Assembly also passed an amendment to the Labor Standards Act to strengthen credit sanctions against employers who habitually delay wage payments.

Meanwhile, the total wage arrears this year are expected to exceed 2 trillion KRW. As of the cumulative data in July, this year's wage arrears amounted to 1.2261 trillion KRW, a 25.73% increase compared to the same period last year (975.2 billion KRW). This is equivalent to 68.71% of last year's total wage arrears, which was the largest ever recorded. The number of victims this year also showed an increasing trend, reaching 175,317 people, a 12.72% increase compared to last year's 155,536 people based on the same criteria.