An overview of marketization’s influence on wages

Marketization brought about massive wage disparities between state-run enterprises and the markets while transforming the traditional roles of North Korea’s proletariat. However, the shifting landscape does not signify an outright rejection of the socialist-planned economy but rather the emergence of a symbiosis of sorts. State-run entities need money generated by the market economy to operate, and participation in the market economy requires the right political connections.  

The wages of North Korean workers, irrespective of sector, have increased exponentially due to market forces. For example, in state-run operations like Pyongyang Textile Factory and Musan Mine, wages have increased by more than a hundredfold. The administrative framework is also greatly affected by any shifts that occur in the market. 

Cabinet members of a given enterprise’s labor board set the wages, which vary based on work assignment, whether it’s heavy or light labor, the technical skills required, and so forth. The wages are fixed in accordance with official state prices ostensibly so that rice and foodstuffs can be covered. When monthly wages increased to 2,000 KPW on account of the Economic Management Improvement Measures of July 1, 2002, the official price for 1 kg of rice was about 42 KPW.   

However, considering the fact that feeding a family of four requires 4 kg of rice daily, or 60 kg per month, a monthly wage of 2,000 KPW is clearly insufficient to cover the staple food, let alone supplemental foodstuffs.

Workers at those locations are operating under a de facto capitalistic system by virtue of their connection to the international markets. For instance, pursuant to the central economy, the iron ore mined from the Musan mines is supposed to be sent directly to the Kim Chaek Steel mill. But at the turn of the century, North Korea expanded bilateral trade with China and began sending 80% of iron ore from Musan Mine directly to its neighbor, and only 10% to the Kim Chaek Steel Mill. This inspired the longstanding joke that Musan Mine is essentially a direct supplier to China. 

Miners receive 700g of rice per person, which is 200g more than the national average. These privileges extend to workers’ families, too. To this end, a new department was created so that the food rations were not sent through the Public Distribution System but directly controlled by the mine’s administration. This is notable because the mine essentially became an autonomous entity, operating outside the confines of the socialist structure, enabling the dramatic increases in wages and rations.  

The cabinet members of the labor board had ordered Musan Mine to adhere to the command economy vis-à-vis import and export practices in 2010; however, as China was an important export target, the coal mine followed the centrally planned economic system on the surface, but followed a market economy system internally. 

They would be classified as state-sanctioned market workers. Many foreign currency earning firms are actually run by the donjuLiterally "masters of money," donju refers to people who hav... More [new affluent middle class] in practice but appear as state-run entities on paper. Wages hinge on a given enterprise’s profitability. A firm with a stronger foothold in international markets nets more profits and therefore more favorable benefits and rations for its workers. However, it’s important to note that foreign currency-earning companies are volatile entities and at high risk of bankruptcy, rendering them a relatively less stable option than somewhere like Musan Mine. 

The market labor pay structure is broken down into monthly, daily, and hourly subsections. Monthly wages are paid to those employed on a relatively long-term basis. For instance, a daily laborer who works in a crude oil refinery plant would pay the standard “8.3 Money” (de facto tax to pursue work outside of an assigned workplace) and proceed to work on a somewhat permanent basis at the refinery. Because such work is classified as hard labor, the worker would be paid twice as much as other daily pay workers. As a general rule, monthly wages are for tasks requiring skills and expertise.  

Day workers, as the name suggests, are paid daily wages by employers who need work only on a temporary basis. They are usually compensated with a kilogram of rice per day, or the funds to purchase that amount. More recently, mobile phones are playing a vital role in facilitating these operations. An entrepreneur alerts a middleman of their labor needs and a broker solicits the workers quickly, usually within 30 minutes. These agents are highly organized and have built up a robust network of people and information. 

This speed and efficiency of the market arena always trumps state efforts to glorify the merits of socialist labor ideology. Such is the power of practical compensation.

Unlike state-run factories or foreign-currency earning enterprises, hourly workers and day workers do not receive monthly salaries. Negotiations from the outset of a work arrangement are crucial to determining pay in these situations. For instance, if there is work to unload cement from trains for an hour, the hourly workers will not settle for the market rate of hourly pay but demand to be paid for the day. For example, the going rate for a day of work (approximately 10 hours), might be around 5,000 KPW. But if the worker only works an hour unloading cement from a train, he will push to receive a full day’s pay rather than the hourly rate, which would only amount to 500 KPW in this case. Opportunity costs bear a significant influence in these arrangements.

Employers stand to incur huge losses if work goes uncompleted. As such, smart entrepreneurs know it’s prudent to pay workers a competitive rate.