South Korean conglomerates, including Samsung Electronics and Hyundai Motor, have set aside around 7.7 trillion won ($6.8 billion) to help reduce the wage gap between large and small companies, joining efforts for mutual growth initiated by the privately run Korea Commission for Corporate Partnership.

A total of 21 companies and public organizations agreed to allocate the money for the next three years, said the privately run commission on Tuesday. The organization was set up in 2010 to address social conflicts between large and small companies. 

Among them are eight conglomerates that include Samsung Electronics, Hyundai Motor and Kia Motors, SK hynix, Posco, Lotte Department Store, CJ CheilJedang, LG Chem and GS Retail. Public organizations include Korea Land & Housing Corp. and Korea Hydro & Nuclear Power.

Of the total sum, over 5 trillion won will be used to support the management of suppliers, while some 2.5 trillion won will be invested to improve the wage payment structure of partner firms. Some 400 billion won will be directly used as wages and other welfare benefits for workers of suppliers over the next three years.

“It is necessary to continue to narrow the wage gap and polarization between large and small firms. We need to develop a market-friendly growth model and link it to the movement to reduce the wage gap,” said KCCP Chairman Kwon Ki-hong.

The widening wage gap between large and small companies has long been a social problem in Korea.

The average wage of companies with less than 50 employees was around half that of large companies last year, according to Statistics Korea.

The Bank of Korea pointed to the growing difference as a key factor behind the nation’s high youth unemployment rate. The unemployment rate among Koreans in their late 20s stands at 23.4 percent, higher than the average of 14.4 percent for member states of the Organization for Economic Cooperation and Development, according to the central bank this month.

In April, the Korea Commission for Corporate Partnership declared that 2018 would be the first year of moving toward reducing the wage gap. The move is based on the principle that large companies should pay their bills at the right price and at the right time. 

By Shin Ji-hye (shinjh@heraldcorp.com)