South Korea chip workers’ bonuses puts central bank on inflation alert

Few workers can say that their bonuses are so large that the country’s central bank takes notice.

But in South Korea, the phenomenon is occurring as workers in the tech industry receive bonuses worth millions of won, prompting the Bank of Korea to warn of upward pressure on inflation.

In a report dated June 17The central bank wrote that this year’s inflation was largely due to increases in energy prices due to the Iran war. But even if this conflict subsides, inflationary pressures could gradually increase as income conditions improve and wage growth becomes more widespread, he adds.

More importantly, BOK said that the payment of high performance bonuses, seen recently in some large companies in the IT sector, could spread to broader wage increases, which could lead to upward pressure on inflation.

This is something South Korea has already experienced inflation above targetwith SHIT predicts this All-year inflation will be 2.7%, above the 2% target.

BOK’s observations follow reports of large bonuses being paid to employees at technology companies, particularly chip heavyweights SK Hynix and Samsung Electronics.

While the exact amount was not disclosed by the companies, SK Hynix we agreed last september A wage agreement was reached that will allocate 10 percent of operating profits as bonuses to employees.

There were Samsung employees It was reported that it was understood After threatening an 18-day strike in May, the semiconductor business said 10.5% of its profits would go to special bonuses for chip workers.

According to an unidentified allegation Union source quoted by ReutersA memory chip worker with a base salary of 80 million won ($52,400) is expected to receive a total bonus of about 626 million won ($410,000) this year.

SK Hynix employees are expected to receive bonuses of more than 700 million won ($454,851) if the company generates annual profits of 250 trillion won this year, according to Reuters calculations.

Normally, bonuses would not contribute much to demand pressure as they are not permanent increases in income, BOK said.

But the central bank said “when special bonuses increase unusually and significantly” the wage increase could spread to other sectors and significantly increase both supply- and demand-side inflation pressures.

“Particularly as recent IT industry performance bonuses have been paid on such an exceptional scale, the possibility that their actual impact may be greater than expected cannot be ruled out,” he added.

BOK Deputy Governor Lee Jiho he said press briefing On June 17, “Sales in places such as Suwon and luxury goods departments of department stores have increased significantly, and this may gradually spread further.”

In South Korean media reports, it was stated that some technology industry workers spent heavily on luxury products in large stores, and that workers bought bags, jewelry and watches.

BOK said that the increase in card spending this year in Gyeonggi Province, home to major Samsung Electronics and SK Hynix semiconductor facilities, was relatively higher in areas close to chip manufacturing facilities and adjacent residential areas than in other regions.

South Korean media outlet Chosun Ilbo said luxury consumption was “growing rapidly” in southern Gyeonggi regions, where Samsung and SK Hynix are headquartered.

Luxury sales at the Shinsegae department store branch in Gyeonggi province increased 53.6% compared to last year. newspaper reported While luxury jewelery increased by 146.3% in May, luxury watches increased by 85.3% in the same period. General store sales increased 19%, according to the newspaper.

Shares of South Korea’s department store operators also rose on rising expectations that high-end consumption will strengthen.

Lotte Shopping, the retail arm of Lotte Group, is up more than 148% to date, with a 67% rise in share price in the last three months alone.

Hyundai Department Store shares are up 120% year to date, up a whopping 113% in the last three months, while Shinsegae has led the pack with a 190% increase in share price since the beginning of the year.

Most of Shinsegae’s gains have been recent; Its shares have increased by 107% in the last three months.