Wage Compression is not Enough: Working Hours and Earnings Inequality in Korea, 2000–2023

Abstract

ABSTRACT This study examines how working hours shaped earnings inequality in Korea during 2000–2023 using a mean log deviation decomposition, which separates earnings inequality into wage dispersion, hours dispersion, and wage—hours covariance. Hours' contribution rose from 12% to 30%, while the negative wage—hours covariance—which allowed low‐wage workers to offset low hourly pay through longer hours—weakened from to . This shift coincided with the expansion of nonregular employment and was pronounced among less‐educated women. Minimum‐wage increases compressed hourly wage inequality, but rising hours dispersion kept earnings inequality high. In 2023, counterfactual simulations holding hourly wages fixed show that minimum‐hours guarantees reduce inequality by up to 23%. Maximum‐hours caps increased inequality earlier but had negligible effects by then. Setting part‐time workers' hours to the full‐time median or women's hours to the male median yields 12%–15% reductions. Thus, wage policies alone may be insufficient where workers face institutionally constrained short‐hour positions.