Assessing North Korea’s Wage Reform: 18 Months Later, Has It Improved Lives or Reinforced State Control?
Eighteen months have passed since North Korea implemented a tenfold wage increase (Cabinet Decision No. 23101-9, October 2023). This landmark decision—coming after 21 years of stagnant and extremely low wages—raises an important question: how has it affected people’s daily lives?
The evidence suggests that real purchasing power has barely changed. Despite the nominal wage increases, market prices have risen sharply in parallel, preventing any meaningful improvement in living standards.
Consider a typical Pyongyang worker whose monthly salary jumped from 3,000 to 30,000 North Korean won. Before the increase, 3,000 won couldn’t purchase even a kilogram of rice. Unfortunately, 30,000 won doesn’t go far today due to a 1.5-fold increase in staple food prices.
The impact varies dramatically by social position. Elite cadres and central government employees earning over 120,000 won have seen genuine benefits.[1] Meanwhile, workers in provincial factories and rural areas report frequent payment delays or receiving only partial wages. Those with access to foreign currency or significant market trading experience have maintained or even improved their standard of living, while vulnerable populations face worsening conditions as prices rise faster than their inconsistent wage payments. This dynamic is accelerating economic inequality throughout North Korean society.[2]
Public sentiment has evolved from initial optimism to growing resentment. When first announced, some people expressed hope that the regime was finally addressing their living conditions.[3] However, as tangible improvements failed to materialize, cynicism has returned. Many now view the wage reform as merely another attempt by the state to reassert control over the market economy. The younger generation especially has adopted a pragmatic approach focused on self-reliance rather than trusting the system.[4]
This perception stems partly from the government’s concurrent push to redirect shopping to state-owned stores after raising wages. However, these official outlets suffer from chronic inventory shortages and inferior product quality, undermining consumer confidence.[5] The regime’s efforts to curtail the market economy have largely backfired, with skyrocketing market prices disproportionately harming low-income households.
The Regime’s Strategic Calculations
From the perspective of the North Korean authorities, the substantial wage increase can be viewed in connection with North Korea’s attempt to normalize the country in its own way. This may be one of its attempts to reorganize and place the official economic system at the center again: a systemic reaction to the fact that the marketized survival structure (jangmadang economy) that emerged after the Arduous March in the 1990s has grown too large, weakening state control. Advocating solving life’s problems with state-owned stores and higher wages aims to demonstrate that the state can effectively manage the economy.
Also noteworthy is the fact that along with wage increases, state-owned stores, grain sales offices, and farm distribution networks (grain management offices) were strengthened and reorganized. This can also be seen as a move to restore a state-led planned economic order, rather than an autonomous distribution structure based on a market economy. In other words, the government is attempting to reestablish the country’s image that it is still a socialist country operated by planning and distribution.[6]
North Korea has previously implemented nominal wage and price systems, which were ineffective due to the significant difference between these prices and market prices.[7] The recent measure to increase wages tenfold aims to match payments with state prices more accurately rather than simply increasing monetary compensation. This adjustment encourages individuals to purchase essentials through the official distribution system, as state store prices have increased alongside the wage hike. In summary, the table below provides further details.
It also appears that the government had concerns that various subsidies set under the previous state pricing system could not solve the welfare problems faced by North Koreans. Welfare funds set at low prices were nearly worthless in market value. Imagine a worker earning 3,000 won monthly and receiving a state subsidy of only 300 won in old age. How can they remain loyal to a regime that insists on “self-reliance” in retirement?
In the end, North Korea’s state prices are the foundation of the socialist welfare system, but maintaining prices detached from reality has hollowed out the welfare system. As a result, “welfare” has been privatized in the market, establishing a paradoxical structure where only those with money benefit. Furthermore, this has naturally led to welfare inequality, class polarization, and the collapse of trust in the public system in North Korean society. The North Korean authorities probably wanted to normalize this problem.
Outlook and Challenges
While North Korea’s wage reform appears to incorporate lessons from past economic failures, it likely faces insurmountable structural challenges. Supply shortages, persistent price distortions, and market resistance all threaten to undermine the policy’s effectiveness.
According to reports from inside the country, a typical family of four requires approximately 300,000 North Korean won monthly for basic subsistence. Yet the regime cannot realistically increase wages to this level in one step—doing so would risk hyperinflation and potentially render the already weakened currency worthless.
The leadership seems to recognize these constraints, characterizing the current reforms as an “experimental” approach. This framing, however, strikes many North Koreans as callous—their basic survival is not an appropriate subject for economic experimentation.
The regime compounds these problems by delegating wage increase implementation to individual enterprises under the banner of “self-reliance.” This approach inevitably favors profitable or politically connected workplaces, widening economic disparities as some workers receive full increases while others get nothing—sometimes even within the same facility. When this creates workplace tensions, authorities simply tell citizens to resolve conflicts themselves.
This implementation strategy represents a significant policy contradiction. While the wage reform ostensibly aims to strengthen the state-run economic system and improve living standards, its decentralized execution undermines both objectives. For this economic experiment to achieve its stated goals, central authorities would need to ensure equitable implementation across all sectors and address the growing disparities that current approaches have exacerbated.
The author extends gratitude to Robert Lauler for translating this article and to the team at 38 North for their valuable feedback during the editing process.
- [1]
Please see https://www.dailynk.com/20250317-1/. According to this article, officials who receive more than 120,000 won per month are not significantly feeling the impact of rising prices.
- [2]
Related to this, according to the US State Department’s 2024 North Korea Human Rights Report, people marginalized in the official labor market in North Korea face threats to their right to survival, and the wealth gap is structurally deepening.
- [3]
Please see https://www.rfa.org/korean/in_focus/food_international_org/marketprice-05242024083656.html. According to this article, “when factory workers’ wages were increased based on market prices at the time, the initial reaction was positive.”
- [4]
Young North Koreans who survived the 1990s famine now embrace market-based self-reliance instead of state distribution systems, showing their diminished value for socialist-planned economies.
- [5]
Radio Free Asia (RFA) reported in October 2024 that in North Korea, “wheat soybean paste made in state-owned factories is less tasty than meju jang made with soybeans by individuals, so many people prefer to buy soybean paste and soy sauce at the market.”
- [6]
The Korea Institute for National Unification pointed out through its “North Korean Economic Trends” Q1 2024 issue (April 2024) that North Korea is still trying to maintain the image of a socialist country through the restoration of the official economic system.
- [7]
Nam, Sung-wook, “A Study on Changes in Production and Consumption Patterns of Residents Following North Korea’s 2002 Wage and Price Increases,” Korea University North Korean Studies Fourth Academic Seminar Proceedings, “Evaluation and Future Prospects of the July 1 Economic Management Improvement Measures,” p.3