South Korea’s annual growth in wages growth has dropped to near zero percent when adjusted for inflation, according to recent data, meaning domestic consumption will likely remain in the doldrums.

The data, for the second quarter of the year, found that wages of temporary workers had dropped in real terms over hte same period.

The findings were based on data compiled by the Bank of Korea and the Ministry of Employment and Labor and released on Wednesday.

The average monthly pay of the nation’s employees was 2.77 million won ($2,665) in the second quarter of this year, a 0.2 percent increase from the same period last year.

This was the lowest inflation-adjusted wage growth since the last quarter of 2011, when wages shrank 2.4 percent in real terms.

Real-terms wage growth has continued to fall since last year. It dropped to 2.5 percent in the third quarter of 2013, from 3.4 percent in the previous quarter. Then, it dropped to 2.1 percent in the fourth quarter of last year and 1.8 percent in the first quarter of this year.

“Because of the protracted economic slowdown and cutthroat international competition, companies have reduced their wages and production costs,” said Yoo Kyung-joon, a chief economist at the state-run Korea Development Institute.

“Companies’ poor business performance also led to the reduction of bonuses and incentives for their employees and the hiring of temporary workers. If this trend continues, domestic consumption will shrink further, creating a vicious circle,” he added.

The average monthly incentives doled out by Korean companies dropped to 330,000 won in the second quarter of this year, down from 360,000 won last year.

The number of temporary workers in South Korea has also continued to rise. They now account for around 30 percent of the nation’s total workforce. Government data showed that wages of part-time workers shrank in the second quarter of this year compared to a year before.

Their average monthly pay packet stood at 1.25 million won, a 1.4 percent drop from 1.27 million won for the same period last year. This is the biggest fall since the last quarter of 2010, when the rate fell by 7.3 percent.

“The nation’s employment started to look up with the monthly new hiring of 500,000 to 600,000 employees. However, despite the job growth, the real income of households may still drop if the real wage growth remains slow,” said Lee Jun-hyup, chief of Hyundai Research Institute’s economic trend analysis center.

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