Mind the Income Gap in Korea

Article from KyungHyang:

Polarization of income distribution has reached a critical point

thegap1

The vicious circle of income inequality is threatening the market economy of Korea. Distribution of wealth has emerged again as the key issue for economic growth and common people’s life.

Mr. Choi (45), who has been working hard as a cab driver for the last 20 years, still thinks that he has not escaped from poverty.

He worked more than 70 hours behind the wheel last week that included the day for local elections and Memorial Day. His wife has been a temporary clerk at a mall for 2 years after working at sales in an insurance company. The monthly income of Choi’s family is about 3.7 to 3.8 million won. Choi said, “It is almost impossible to save money and we cannot even think of traveling. My one and only hope is to move to a new place with 3 rooms for my son and daughter.”

Prof. Lee Jeong-wu, who served as policy chief during the Roh Mu-hyun administration, said, “Polarization of income distribution generates an economic recession, and people feeling an economic loss have reached their limits. We have come to a point where the issue of distribution can no longer be ignored.”

According to an announcement from the IMF last year, GDP per capita in Korea was 24,329 dollars. If a family consists of 4 members like the Choi family, their annual income should be around 100 million won. However, these families who earn 100 million won annually are regarded as the top 10%. Household survey data by Statistics Korea suggests that the lowest income of the top 10%, a family having more than 2 people and working in an urban area, was 93,681,408 won.

For the last 30 years, Korea has experienced rapid economic growth. Korea is ranked at 15th in the world in terms of GDP, and has top leading companies including Samsung and Hyundai. The life of common individuals, however, is miserable and unfortunate due to unequal distribution of wealth. 1 out of 6 people live with less than 10 million won per year, and 1 out of 4 households is more often in the red than in the black. The poverty rate of people over 65 years old is 48.5% which is 3.4 times higher than that of the OECD average. Moreover, the suicide rate is among the highest in the world.

The problem is that the income polarization is worsening as time passes. According to Statistics Korea, the average monthly household income of the top 10% was 10,627,099 won. It is 5.1 times higher than that in 1990, which was 2,097,826 won. For the bottom of 10%, the figure increased 3.6 times from 248,027 won to 896,393 won. During the same period, the gap between these two groups increased from 8.5 times to 11.9 times. The data is based on 8,700 households, not including the extremely poor or Chaebol families, so the actual gap appears to be much larger. Despite this, the government delays implementation of the policies for economic democratization and makes cuts to social welfare while it pulls back regulations for big companies and the rich.

Deterioration in wealth distribution not only makes one’s life harder, but also brings about conflicts between people of different economic classes. It diminishes the vibrancy of economy and threatens the existence of economy in capitalism. Joseph E. Stiglitz, a Nobel Prize winner in economics, warned us in his book 〈The Price of Inequality〉 saying, “Inequality impedes economic dynamism, efficiency, and productivity. A distribution system independent of efficiency becomes a vicious cycle. In turn, all of society sinks.”

Comments from Naver:
jeon****:

If you’ve ever played the board game ‘Blue Marble’ before, you will know the rich will be richer. That’s what capitalism is about. Unlike the game, even the starting point isn’t fair for everyone in reality.

uner****:

If I agree with this article, I will be called ‘bbalgaeng-i’ [commie] by slaves in the same poor situation, ke ke . Frankly speaking, income polarization will be more extreme due to those slaves who can’t think…

kate****:

Even under these circumstances, there are many people saying if Samsung fails, so does Korea.

good****:

The combined monthly income of my girlfriend and I is just over 5 million won after taxes, and we don’t know how we can get our own house in Seoul. To use a rental housing system in Korea we should get married first. If you have a baby, the system is more advantageous. But we’re not planning to have a baby right after the marriage so marriage seems pointless.. People don’t have babies if they’re not confident with their future, unless they’re living in developing countries where they don’t do much family planning. What’s the use of complicated statistics? To figure out how young people are living, it’s more than enough to just look at the birthrates in Korea.

pebb****:

It is just like a scene from a movie. How depressing.

kimy****:

What I can’t understand the most in the world is a poor conservative.

dies****:

You should blame the people who voted for Lee Myung-bak, a lowly person with no philosophy, hoping that their house prices would rise.

mas6****:

The country does have a problem. People who work hard have a hard time making ends meet while celebrities who just sing and show off their faces are living as billionaires, and cheaters and swindlers are well-off.

spec****:

However, those people who are suffering from poverty would support privatization, oppose tax increases, regard welfare advocates as commies and vote for the Saenuri Party.

hana****:

The income polarization is getting stronger not only among companies but also among individuals. Samsung Electronics is taking half of the profits in the listed market. Bankruptcy for small businesses is happening every day, and however hard individuals work, it is still hard to make a living. A ladder of hope is created not by individuals, but by an institutional system to support them. A good society is where people who try to work hard can live well.

doct****:

In Germany, people are not discriminated on grounds of their educational backgrounds. 4th grade students are already separately preparing for entering a vocational school like Realschule or an academic school like a Gymnasium. People choose jobs according to their aptitude. There is no practical difference in wages between big and small companies. Rental housing is run by the government, and people don’t need to worry about it. No school fees, no private educational market like hagwons in Korea. Every weekend a family goes camping in a suburban area and children play football. Middle-aged people collect cars, and the old travel all over the world. It is true that the Germans are outstanding people.

mas6****:

In Korea, if you live an honest life, you will be poor as a beggar. To own a building, you should steal something or fool somebody, and you will live happily ever after. Money does everything in Korea! Cheers!

jin0****:

The insane prices as well as the income gap are a problem. No good life for the middle class as long as the issues of housing and raising children go unsolved. The future seems gloomy.

tldn****:

It’s easy to redistribute income. Raise the hourly minimum wage to 10,000 won. The rich will definitely say the company will fail due to the wage increase, and so will Korea. This is just bullshit. Though the big company makes lots of profit, their subcontractors have never properly been rewarded for it. The tyranny of big companies keeps the technologies that small companies have from growing. However, small companies aren’t doing their job properly, either. They focus on hiring people for low wages for temporary gains rather than on investing its budget in improving production facilities. This kind of management has reached the limit, and the companies are losing its competitiveness.

veil****:

The dynamic movement between social classes is coming to the end. Students should study hard to become professionals. Even most of professionals may remain in the middle class soon. If the movement between classes is closed, the obsession with entering a good university will diminish.

phs7****:

Money brings money and debt brings debt!

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  • Taylor

    Capitalism is like a monopoly boardgame. the rich gets richer, the poor gets poorer.

    A war will reset the game. So poor people out there, hope for an economic collapse, that’s where most hope lies.

    • Paulistano

      Very pessimistic vision. The capitalism you describe is called Neo-liberalism. To avoid that, the State must regulate the economy and social spending.

      War is not the solution Mr. Warmonger, it will only cause more suffer for masses, I don’t see where war can benefit poor people. Economic collapse?? I’m sorry, but I think you have to look the basic of how an modern economy fuctions, because explaining to you would be too extensive.

      • kpopwillneverstop

        Well then, it appears that a vast majority of the world is experiencing neo-liberalism then.

        I wouldn’t say to go to war though. That’ s a bit too extreme. But the people must realize that the concept of democracy is that “the people have the power” and actually use that power instead of believing everything the media says and follow it like mindless sheep, that is, if they even try to watch the news (but this is speaking from an American perspective because most of the time, it feels like I’m surrounded by idiots who just want to party and follow celebrity gossip).

        • bigmamat

          You are calling for a popular movement. The US has had many of those and it seems the time is ripe for another. I’m thinking unions again. This is about economic equity. We’ve seen a slow awakening like with the McDonald’s protests. The tide is also turning for many large companies. They’ve strangled off their consumer base. Restaurant chains, retailers, and even Walmart has seen a steady downturn in profits. You can’t break the people who are buying your product. It’s the old Henry Ford rule.

          • kpopwillneverstop

            Exactly and speaking of unions, it annoys me to the eleventh power, the number of idiots who protest against unions, but have no clue what a union even is, so they get the definition from an even more bigger bigoted idiot (like the Tea party) instead of looking up what it actually is.

      • Tova Rischi

        When severely agitated, people generally revolt. Even in the DPRK, popular discontent has been rising; China has been nakedly discussing what happens when the regime falls to popular revolt. It isn’t a humane or beautiful solution; in fact, mitigating it and/or working with it so as to minimize the damage it causes is a goal for many in academia and activists for peace (look to the color revolutions or Gandhi). No credible economist or sociologist denies that.

        But it is undeniably a mechanism in large-scale human behavior. And, as bad as it sounds, Marxian (as opposed to dogmatic pseudoscientific Marxist) historiography is generally accepted as a crude but fundamentally correct model of history (various sociologists have since attempted to improve it, and their volumes and volumes of work are why he’s counted as a father of sociology, not prophet thereof) and the way that classes exchange places is historically evident (eg the various peasants becoming the sources of dynasties in China).

        In short, he wasn’t mongering war, he was warning of its inevitability. I’m sorry real life looks pessimistic from naively optimistic eyes.

    • A Gawd Dang Mongolian

      No, this is less a problem with the system and more with the people.
      South Koreans are notorious for spending more than they have.

      I believe there was a popular song written about this social problem a while back.

      “Something”-style

  • Chucky3176

    Look at the Gini coefficient Index table, South Korea, compared to the most countries, still has a fairly low spread between rich and poor. The US and China are far worse when it comes to differences between rich and poor. Both of these countries are running away with that honor. Koreans who whine about not being able to make ends meet, are the same people who will blow third of their income on their children’s private education, or blow couple of hundred thousand dollars on their children’s wedding. Don’t spend so much money on your children, and save some of that money on old age retirement, and you wouldn’t be in poverty when old age comes. How’s that for a plan?

    • Poor will be poor anywhere, especially if they are in a developed world, when they give you false hope and you are surrounded by luxury and beauty everywhere but your life is crapy along with high inflation and expectation for you to do well always.

      Ask me..I’m from a third world country India….Its just that the western world acknowledges how poor we are..but when poor people in rich countries complain they are thrown these stats like GNI co-efficient to shut up and be thankful that you are in a first world country.

      Its the feeling of being poor not the stats of being poor in a first world country. Please don’t come to third world countries and call us poor while ignoring your own people. take care of your people first please.

      • bigmamat

        I watched an episode of HBO Vice last year that showed the huge disparity between the rich and poor in India. It’s very shocking to see high rise luxury apartments and single family dwellings (they pointed out a 27 story single family building) overlooking a vast slum that holds several million people. It makes you wonder how someone could live in splendor while observing the rest of humanity pick through the trash to survive. In the US the rich live mostly isolated from the poor and middle class so they don’t have to look at what is happening in the rest of country.

        • Boris

          America has more space and less people than India :P

  • I LOVE K-POP!

  • HaydenG

    Nothing but economic ignorance in this article..

    This guy’s household income is 3.8 million a month and he considers himself poor and cant save?? Well he must be blowing all his money on cigarettes and booze like most koreans do because thats a 45k salary which is considered middle class even in America.

    • Chucky3176

      Then again in America, they don’t spend $400 to $1000 a month on their kid’s private education. This guy has two kids, that means he has to spend at least $1000 a month minimal on hagwons for his children. There goes at least a quarter, and probably a third of his income right there off the bat, before all other expenses.

      But the thing is, he and other Koreans don’t have to follow the sheep. Let the kids take care of themselves. They either pay attention in public school classrooms and learn to study effectively, or fail. They don’t need the extra after hour classes.

      • HaydenG

        those hakwons are a huge waste of money.

      • Mang

        That would require the parents to think for themselves instead of following blindly. Or actually ask the questions “Why do our kids need all this additional tuition? There must be something seriously wrong with our schools or society is totally out of sync.”
        But they wont do that. Kids, who will never ever need it, will keep studying English grammar that even most native speakers would’nt understand. And average Koreans will continue to feel under pressure economically.

        • bigmamat

          People all over Europe speak better English than Koreans with less intensive education. They start in the primary grades but focus more on practical usage rather than grammar.

          • Guest

            “People all over Europe speak better English than Koreans”
            haha not on the south (i.e spain, portugal, italy etc)

          • bigmamat

            Yeah I understand Italians aren’t that good at English either.

      • Black_Plague

        ^ This.

        My aunt in Korea, in spite of her husband earning a very good income, doesn’t send her kids to hagwons either as there just is no real practical reason to; not only are they a waste of money but also because her kids actually do well in school and are happy with their lives (mostly anyway). Then again, such is more of an exception than the norm in Korea.

        Spending on private education there is absolutely ridiculous, especially when you can simply seek to learn the info yourself on the web, which is far, far more cost-efficient. All what one needs is the motivation/mindset to do so.

      • bigmamat

        Americans spend that much on daycare. Granted daycare ends when your child is around 13 in middle school but it’s a huge burden when they are young. Most married women in the US continue to work and we have a lot more single parents.

    • Mike

      They make 3.8 million (~$3746 US) per year.. not per month.

      • HaydenG

        you are wrong… its per month. 한달에 370만~380만원 thats 3.7-3.8 million per month.

      • Chucky3176

        uh… no. It per month.

    • Chucky3176

      Considering that two people (not one) are making 3.8 million a month, they are a poor working family. Because two working parents are making what one average Korean makes in a month on average.

      Here’s the list of average wages for each countries, including S.Korea.

      http://en.wikipedia.org/wiki/List_of_countries_by_average_wage

  • MeiDaxia

    Capitalism without ethics, that is what creates income inequality. You can strive to make money but still be ethical, I think.

    • bigmamat

      Ethics break down in the face of share holder profits and astronomical CEO pay. Ethics doesn’t work but government regulation and taxation does.

      • MeiDaxia

        If ethics are there in the first place, you won’t have astronomical CEO pay without also having astronomical salaries for everyone else. If you try to force ethics on everything now, sure it will break down. Maybe I wasn’t clear, but I meant starting from scratch with ethical business practices. I don’t think it is impossible.

        • bigmamat

          Aren’t you the cockeyed optimist….

  • Truck Furniture Maker

    This is an issue which plagues all countries of wealth; although some more than others. I believe the only solution is equal ownership for all employees, but not equal employment. All workers have an equal stake in the running of ans profits of a company; however salary inequality remains. In other words the CEO can make 300,000 and a new employee 25,000 but each have equal say in the hiring of the board and profit distribution/expansion decisions.

  • Science Patrol

    It’s similar in the US. There are the few super rich and we still have a large middle class. But what you don’t hear about are the millions of working poor, adults earning $10/hr, living on the edge of ruin, with no prospect of improvement, and that underclass gets bigger every day.

    • bigmamat

      Now the middle class and their children are caught up in it with a mountain of college debt.

  • Guest

    Just replace it with South Korea

  • Guest
  • SorayaVonDerAlm

    “In Germany, people are not discriminated on grounds of their educational backgrounds….”

    So wrong. I live in Germany and most Parents don’t want their kids to go to the Hauptschule or Realschule because Kids that go to these schools are seen as not smart, they are stigmatized. Most of the Kids that go to these schools have a low socio-economic Background and if these kids don’t work extra hard they will never be able to move up. It is sad to admit it but there is discrimination on grounds of educational background in Germany.

  • Capitalism and Communism are just two side of the same coin to screw humanity. False left-right paradigm.

    People are being screwed in Capitalism, Communism and Socialism with few becoming rich and rest suffer. The story of Korea is like the Story of rest of the world…Go to Japan to America to Europe…Only few are rich..WHY?

    Its just BS brainwashing Media manipulation that just keep on working hard and one day you will be rich etc etc BS

    • KCdude

      Absolutely correct, good sir.

    • Dominic ‘Dom’ Dinkins

      Yep, they are all falwed because humans are flawed. Capitalism seems to be the best of the evils, but even then, it eventually runs into disarray and then a reset is needed.

  • KCdude

    I recommend people to read Thomas Piketty’s Capital in the Twenty-First Century. It proves that capitalism as we understand around the world will eventually collapse not by Marxist class struggles, but by over-concentration of wealth to a minority of people.

    “Marx was wrong, but Piketty is right.”

    • bigmamat

      Yeah and they’re all pissed at him for saying so….it’s created a shit storm in the US. Since they want to keep telling people the reason they are broke is that they’re lazy.

  • KCdude

    “In Germany, people are not discriminated on grounds of their educational backgrounds. 4th grade students are already separately preparing for entering a vocational school like Realschule or an academic school like a Gymnasium. People choose jobs according to their aptitude. There is no practical difference in wages between big and small companies. Rental housing is run by the government, and people don’t need to worry about it. No school fees, no private educational market like hagwons in Korea. Every weekend a family goes camping in a suburban area and children play football. Middle-aged people collect cars, and the old travel all over the world. It is true that the Germans are outstanding people.”

    Korea’s public education will go down the drain anyways. So I think Korea’s education sector needs a strong gift economy right when private cram schools will dominate for at least 3-4 decades.

    How I predict South Korea’s future in the next 20-40 years is this: everything in Korea except hospitals will be privatized, even the military and public schools will be privatized eventually.

  • Jang

    I recently moved away from S. Korea as an English teacher where I received housing as part of the teaching deal/contract. Now, in my home country I still get free housing through my job but I don’t have any electric/gas, or cable/Internet monthly bills like I did in S. Korea. Plus I get a generous daily food per diem and best of all is I get “Standby Work” pay. For example, yesterday I went to work(rode along in the company vehicle-no gas, bus, subway fees) and was only on site for less than one hour but got paid for 8 hours and those 8 hours count as overtime.

    Of course to qualify for overtime I had to work or have “Standby Work” hours that accumulated to at least 40 hours which is of course the case. I’ll be getting 9-10 hours of pay per week of drive time to and from work as well. If the weather is bad or rainy I get “Standby Work” pay. I almost feel like a S. Korea cop or worker who gets paid for taking naps.

    I saved 10 grand on average per year in S. Korea but at this rate in my home country I could save 50 grand per year. My only bills are phone, car insurance, and a bit of gasoline. My new vehicle I paid for in full 3 weeks after I returned from S. Korea and I only drive it for errands or for pleasure.

    I’m glad I made my S. Korea exit so that I don’t have to experience its “Income Gap” any longer.

  • Perseus Wong

    “Mr. Choi (45), who has been working hard as a cab driver for the last 20 years, still thinks that he has not escaped from poverty.”

    So what’s stopping Mr. Choi from looking into other more profitable lines of work? Has he been robbed of that opportunity by other entrepreneurs who also had to struggle just as much to make their millions? What does Mr. Choi want? A mansion? A car? Servants? Why does he think driving a cab for 20 years would entitle him to that?

    Would KyungHyang (author of this article) be willing to pay twice the amount of Mr. Choi’s regular cab fare to help close his income gap? KyungHyang could have just as easily helped Mr. Choi with a fundraiser or helped him secure a small business loan. But, like many people who don’t know how the free market works, KyungHyang chose to write some sophomoric, sanctimonious, generalized piece about the evils of capitalism.

  • MikeinGyeonggi

    Good article. But I have a problem with the cab driver claiming his 3.8 million household income is “poverty.” Sure, you can’t buy your wife luxury bags on that income or pay for your kids’ tuition in full. But it’s certainly not poverty. Live simply and don’t support your kids until they are 30.

    And the young couple who are NETTING over 5 million per month are worried that they can’t BUY their own apartment in Seoul?? It’s time to get realistic about expectations!

  • dark

    Koreans are the most uneducated, but opinionated, and not so flexible to change in whole of Asia. Do you know the Gini coefficient? Korea is just ahead of African underdeveloped countries. Nationalism about to support chaebols, and indifference to proper education. Might as well be swallowed by Chinese economy soon. Back to the Joseon age.

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