Bank of Korea: Rise in Firms Paying Large Bonuses Could Push Inflation Up by 0.05%p

An analysis suggests that if the number of businesses providing large-scale performance bonuses, such as Samsung Electronics and SK Hynix, increases, the consumer inflation rate could rise by 0.05 percentage points (p).

The analysis indicates that even when bonuses are concentrated in a few companies, the pressure for overall wage increases spreads, stimulating inflation from the demand side.

Consequently, there are forecasts that large-scale bonuses at some major IT companies could lead to upward pressure on prices.

In its 'Inflation Targeting Operation Situation Report' released today (June 17), the Bank of Korea (BOK) stated, "When large amounts of special bonuses are concentrated in a few businesses, upward pressure on prices increases significantly."

According to the report, when the proportion of businesses paying bonuses in the top 10% of the industry increases, consumer prices rise by 0.05%p after five months.

On the other hand, when the proportion of businesses paying average bonuses in the 40–60% range increases during the same period, the cumulative impact on consumer prices was negligible.

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

In the first quarter of this year, nominal wages rose by 3.4% compared to the same period last year, with the contribution of bonuses in the IT sector accounting for 1.3 percentage points (p).

This corresponds to the 97th percentile based on the wage distribution from 2012 to 2025, which is an extremely high level.

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

The BOK analyzed that if such a large increase in bonus payments occurs, it could exert wage increase pressure on other industries.

This is because when wage levels in specific sectors rise significantly, workers use them as a reference wage for wage negotiations and demand changes to the wage structure.

The BOK explained that this can increase demand-side pressure on prices, thereby raising consumer inflation.

The BOK projected, "It has been shown that when special bonuses increase significantly and are concentrated in a few businesses, upward pressure on prices rises significantly. In particular, since recent bonuses in the IT sector are being paid at a very unusual scale, the possibility that the actual impact will be greater than expected cannot be ruled out."

The bank further suggested, "It is necessary to closely monitor wage trends by industry to see how future increases in special bonuses in the IT sector will spill over into other sectors and whether they will lead to overall increases in fixed wages."
※ Please note: This article was translated by AI and may contain errors.