BOK Warns Big Bonuses at Samsung, SK Hynix Could Drive Up Inflation

An analysis shows that an increase in businesses paying large performance bonuses, such as Samsung Electronics and SK Hynix, could act as inflationary pressure, raising the consumer price inflation rate by 0.05 percentage points.

Even if bonuses are concentrated in a few businesses, the overall upward pressure on wages spreads, stimulating inflation from the demand side.

In its report on the assessment of inflation target operations released today (June 17), the Bank of Korea (BOK) stated, "When large amounts of special payments (performance bonuses) are concentrated and paid out to a few businesses, upward pressure on prices increases significantly."

According to the report, if the proportion of businesses paying performance bonuses at the level of the top 10% in the industry increases, consumer prices rise by 0.05 percentage points five months later.

On the other hand, if the proportion of businesses paying average performance bonuses in the top 40 to 60% range increased during the same period, there was almost no cumulative effect on consumer prices.

The BOK explained, "Even if special payments across all industries rise by 10% equally, the impact on prices is limited if the increase occurs at an average level. However, if the increase is concentrated in certain sectors, it can have a significant impact on consumer prices with a time lag."

Consequently, outlooks suggest that the recent expansion of performance bonuses at major IT companies will affect prices.

According to the BOK, the recent wage growth is concentrated in the performance bonuses of major IT companies.

In the first quarter of this year, nominal wages rose by 3.4% year-on-year, with the contribution of performance bonuses in the IT sector accounting for 1.3 percentage points.

This is a very high level, corresponding to the 97th percentile based on the wage distribution from 2012 to 2025.

Looking at the wage growth rate, special payments in the IT sector in the first quarter surged by 60.6% year-on-year, while those in other sectors rose by only 2.1%.

In particular, the BOK projected that the contribution of IT bonuses early next year is highly likely to reach an unprecedented level, exceeding the top 1%.

When performance bonus payments increase significantly like this, it puts upward pressure on wages in other industries.

The BOK explained that as the purchasing power of IT company employees receiving high performance bonuses increases, demand for services such as wholesale, retail, food, and accommodation in nearby areas rises, which in turn can increase wage pressure in the service sector.

Indeed, in Gyeonggi Province this year, the growth rate of credit card spending in Yongin, Hwaseong, and Seongnam—cities adjacent to semiconductor factories—was higher than in other regions.

The BOK noted that if the scale of performance bonuses becomes exceptionally large, the spillover effect could extend beyond the service sector to all industries.

This is because workers in other industries use the salary systems of major IT companies as a reference wage, making it the standard for wage negotiations and demanding changes to their own wage structures.

The BOK assessed that upward pressure on wages could further fuel demand-side inflationary pressures, thereby driving up consumer prices.

However, considering that small and medium-sized enterprises (SMEs), small business owners, and the self-employed are facing severely deteriorated profitability due to high oil prices and other factors, the non-IT sector has little room to raise wages.

The BOK projected, "Since recent performance bonuses in the IT sector are being paid out on an exceptionally large scale, we cannot rule out the possibility that the actual impact could be even greater than expected."

It also suggested, "There is a need to closely monitor wage trends by industry to see how much the rise in special payments in the IT sector spills over to other sectors and whether it leads to an overall increase in regular wages."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.