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One of the most serious problems facing Korean economy is the erosion of international competitiveness since wage rate increases high and wage payment system is inferior. We know that the factor market responses the changes in product market. However, both price and employment adjustment mechanisms are not working properly in Korea. Thus factor market responds through the overtime adjustment. However, due to the shortening of legal working hours, even the overtime adjustment is not properly working,During the 1976-2004 period, nominal wage increased 14.9% in nonagricultural sector and 15.4% in manufacturing sector, however nominal labor productivity increased 12.6% and 14.7% respectively. Even after the IMF bailout, wage increased faster than labor productivity except in 1998.We find that the major problems in the process of wage settlement are as follows：When labor and management negotiate over wage increase, they utilize the data based on economic forecast, resulting in huge gap in perceiving appropriate rates of wage increase. Furthermore it is noticed that rate of wage increase is higher than productivity increase. In order to resolve this problem, we suggest that both labor and management agree moderate wage increase and they may adjust wage later in the form of extra bonus, considering profit and labor productivity by the end of year as Japan and Singapore adopted the system since 1980s.