Taxes and Insurance Premiums Rise from 12% to 14% of Wages
Essential Living Costs Outpace Wage Growth
"Income Tax System Needs Reform to Ease Burden"
An analysis has been raised that over the past five years, the burden on workers has increased as wage income tax, social insurance premiums, and essential living expenses have risen faster than salaries.
According to the Korean Businessmen's Association, over the past five years, the average monthly wage for workers increased by 3.3% per year (from 3,527,000 won in 2020 to 4,154,000 won in 2025). In contrast, wage income tax and social insurance premiums withheld from salaries grew by 5.9% per year (from 448,000 won in 2020 to 596,000 won in 2025). As a result, the proportion of taxes and social insurance premiums in wages expanded from 12.7% to 14.3%, while the average monthly net income for workers increased by only 2.9% per year, from 3,079,000 won in 2020 to 3,558,000 won in 2025.
Wage income tax (including local taxes) increased by an average of 9.3% per year during the same period (from 131,626 won in 2020 to 205,138 won in 2025). The Korean Businessmen's Association cited the main reasons as the income tax base not reflecting increases in prices and wages, as well as the basic deduction amount remaining unchanged since 2009.
Social insurance premiums rose from 316,630 won per month to 390,579 won over the five-year period, an average annual increase of 4.3%. By category, the growth rates were 5.8% for employment insurance, 5.1% for health insurance (including long-term care), and 3.3% for the national pension. The association explained that increases in insurance premium rates were driven by higher unemployment benefit expenditures and expanded medical expenses for vulnerable groups following COVID-19. Since 2026, health insurance premium rates will rise from 7.09% to 7.19%, and national pension premium rates will increase by 0.5 percentage points each year, meaning the burden on workers is expected to grow further.
Essential living expenses were also cited as a factor lowering workers' perceived income. Over the past five years, the price of essential living expenses rose by an average of 3.9% per year, outpacing the wage growth rate of 3.3%. By major category, the increases were: water and utilities (6.1%), food and non-alcoholic beverages (4.8%), dining out (4.4%), transportation (2.9%), and housing (1.2%). Among 23 subcategories, 17 items saw price increases exceeding wage growth, with particularly sharp rises in other fuels and energy (10.6%), gas (7.8%), and electricity (6.8%). Food-related prices also recorded high increases, including fruits (8.7%), processed foods (5.0%), dining out (4.4%), and livestock products (4.0%).
The Korean Businessmen's Association suggested that a comprehensive strategy is needed to increase workers' real income, covering wage income tax, social insurance premiums, and overall grocery prices. As a priority, it proposed introducing an income tax indexation system that automatically adjusts tax brackets in line with inflation. However, it added that since such a system could reduce tax revenue, it would be necessary to lower the proportion of income tax-exempt individuals in Korea to the level of major economies in order to broaden the tax base.
It also emphasized the need to minimize increases in insurance premium rates by preventing repeated claims for unemployment benefits and excessive use of health insurance, and by improving the pension expenditure structure. Regarding grocery price stability, the association highlighted the urgency of improving distribution channels for agricultural and marine products, and raised the need for legislation to make the currently temporary online wholesale market for these products permanent.
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