A shocking statistic released recently by the Organisation for Economic Co-operation and Development (OECD) reveals just how heavily the pockets of workers worldwide are being weighed down. It has been confirmed that over the past year, the tax burden imposed on labor income by OECD member countries has surged to its highest level in the last decade. In particular, the labor tax burden that single workers without children must bear, known as the 'tax wedge', has reached approximately 35.1% of employment costs, setting a new historical high. When examined by region, Belgium at 52.5%, Germany at 49.2%, and France at 47.2% are among the major European countries facing high tax rate burdens, demonstrating that taxation on wage income is intensifying globally.
Major economic media outlets such as the UK's Financial Times have offered analysis stating that governments struggling with financial pressure have no choice but to target labor income, which is easier to grasp, rather than highly mobile capital. Since wages are a fixed source of income that cannot flee, it is the most efficient method for governments to secure revenue by taxing them. Economists explain this as high 'tax elasticity', pointing out that governments prefer a tax source where tax revenue naturally follows an increase in tax rates. Labor income perfectly fulfills the structural characteristic of being the first target for taxation when finances are dire, making it a key tool for securing government budgets.
South Korea is not an exception to this trend but is rather cited as a model case. Tax revenue collected from labor income surged from 4.1 trillion won in 2020 to 6.8 trillion won in just five years, recording a growth of about 65%. This increase is not solely due to an increase in the number of employees and wage rises; the main cause is the phenomenon of 'silent tax hikes' where higher nominal income pushes individuals into higher tax rate brackets. Furthermore, the burden of social insurance premiums is also increasing. Over 10 million corporate health insurance members will have to pay an additional average of 220,000 won monthly starting this month, as last year's revision records are being applied to April health insurance premiums. Among the total 16.71 million corporate employees, 10.35 million whose wages or grades have risen are structured to pay an additional 218,574 won on average through annual reconciliations, creating a vicious cycle where wage increases directly lead to increased insurance premiums.
From this year, the national pension insurance premium rate is scheduled to increase by 0.5 percentage points each year for eight years until 2033. Although this is being pushed forward under the pretext of 'pension reform' for future income preservation, voices of dissatisfaction calling it an '8-year fixed, quasi-tax increase program' are emerging among young workers. It is expected that for a corporate employee earning 3.09 million won monthly, by 2033, they will have to contribute an additional 120,000 won or more per month combined with employers compared to now. Although South Korea appears to have one of the lowest tax burden rates among OECD countries, this is merely the result of excessive application of deductions and exemptions. The nominal top tax rate is actually higher than the OECD average; however, high-income earners lower their effective tax rate through various deductions, while low-income earners fall into tax-free categories. One out of three wage earners pays no income tax at all, indicating that as the tax base narrows, revenue increases, suggesting that the burden per taxpayer has increased dramatically.
Politics tends to favor strengthening taxation on labor income rather than capital income, reflecting the reality that capital engages in lobbying while wage earners only vote, which has been incorporated into tax system design. No past government has adopted a straightforward method of reducing the ratio of tax-exempt individuals and expanding tax sources; instead, they have pursued policies that only increase the burden on labor income. In the end, wage earners are trapped in a structural trap of tax design, unable to escape, demonstrating that the thickening of the pockets of the poor is not a simple policy failure but a result of systematic design issues.