User:Lee Jaeseong/Economic inequality in South Korea

Korea is a country with growing economic inequality. Low-income workers at 37.8 percent account for 8.47 percent, or 31 trillion won, of the total income. On the other hand, 1.7 percent or 32 trillion won accounts for 1.4 percent of workers earning more than 100 million won.

It is a paper on polarization of labor market.

Current situation

Only within the OECD, Korea is on a fairly good axis in terms of indicators such as the Gini coefficient, the Palma ratio and the gap in income mood, especially when limited to countries with a certain population. And it's actually pretty good when you look around the world.

But the problem is that polarization has not eased at the current level until 2018 after the IMF, and rather is becoming more and more serious.

In 2014, the poverty gap ratio stood at 39 percent, ranking third overall among OECD countries. According to Wells X, the nation's top-tier 1390 people monopolize assets worth around 270 trillion won, comparable to the national budget.

In 2020, the Covid-19 incident greatly increased Korea's OECD poverty rate.

Moon Jae-in further deepening the gap between rich and poor, the government. In particular, it was deepened by the global Pandemics due to the Covid-19 crisis in 2020.

The following table shows the number of people and earned income by annual salary in Korea.

Sort	Number of People	Percentage of total workers	Earned Income	Percentage of total earned income
10 million won or less	4.51M	31.6%	21.0 trillion won	5.70%
12 million won or less	5.41M	37.8%	31.3 trillion won	8.47%
30 million won or less	9.90M	69.3%	123.0 trillion won	33.28%
45 million won or less	11.89M	91.4%	123.0 trillion won	47.15%
60 million won or less	13.06M	91.7%	260.2 trillion won	70.41%
80 million won or less	13.82M	97.4%	313.1 trillion won	84.72%
100 million won or less	14.09M	98.6%	337.4 trillion won	91.30%
Over the 100 million won	0.19M	1.4%	32.2 trillion won	8.70%
SUM	14.29M	100%	369.6 trillion won	100.00%

2020 OECD Poverty Rate Rank. South Korea ranks second overall.

Looking at the above table, we can see that high-income earners earning more than 100 million won, which is only 1.4 percent, share 8.7 percent of the nation's total revenue. This shows that the gap between the rich and the poor in Korea is so wide.

Counterargument

However, some say that the gap between the rich and the poor in Korea is not as serious as that in other countries.

In 2019, xinhuanet said the government-led growth policy saw a drop in the Gini index, an index of inequality, from 2018. However, it is too much to say that the figure has improved unconditionally as it has decreased due to sluggish economic growth among high-income earners.

In 2020, director Bong Joon-ho's parasite hit the market, and he also covered articles on Korea's economic inequality in foreign countries. The article shows that the domestic Gini index is quite low. The ratio of the top 1 percent of the total income is 12.2 percent, indicating that it is much lower than that of the United States.

Problem

Economic polarization creates many problems. The establishment continues to build up their power, and the poor end up losing it.

Social anxiety weighting

With the majority of people in the low-income bracket and no hope of rising the class, they lose the will to work hard. In this society, gambling is easy to fall into, and this is an example of the bitcoin craze in 2017.

Political populism

Middle and low-income people, who are unable to make ends meet immediately, sympathize with extremism and become mired in political unrest. In this case, there is a possibility of being swayed by populist policies, such as the National Revolutionary Dividend Party set up by Huh Kyung-young in 2020. In fact, many people were tempted and responded to the party's absurd story.

Excessive competition for learning

The larger the gap between the rich and the poor, the greater the competition between children's grades, and the same goes for Korea. In capitalist countries, children's sexual competition tends to be prioritized in order to overcome the economic gap. So is the trend of college admission in our country.

Cause

There are many causes for economic inequality, but the following causes are mainly talked about in Korea.

Foreign exchange crisis

Not only the financial crisis itself, but also the ensuing contraction in domestic investment and worsening overall employment conditions. A slump in the domestic economy and strengthening the nation's economic structure dependent on exports. Before the Asian financial crisis, local companies used to make lax investments, ironically these over-investments had a positive impact on employment.

The intensification of social competition

In the real economy, the imbalance of information results in reverse selection or moral hazard. The efficiency wage theory may be applied to solve the problems arising from this. Then, contrary to conventional wisdom, the phenomenon of "giving more to hardworking people than to work" occurs. It is easy to understand that there is a big difference in prize money even though the difference between first and second place is very small in a big competition. People who are confident of their own skills will prefer a competition with a big prize money because they think 'I can be number one.' It serves as a mechanism to drive out the uncompetitive and attract the competitive. In other words, in theory, the more strictly one considers who is good or bad, the more polarization can be intensified. For now, meritocracy is the clearest and most reasonable resource distribution standard in reality when there is no external pressure, so it is valid both in terms of efficiency and in terms of legitimacy. However, polarization is another matter. In other words, a legitimate society can be more polarized, and the oppositely unjust society can be called a more equal society. Simply saying that polarization is severe cannot determine that society is unjust or unjust.

Political inequality

In his book The Great Leveler, Schaedel said that political inequality creates economic inequality. In the book, the author said, "As the nation has historically been formed, public power has been concentrated on a few people. In terms of hierarchy, it is a very sharp spire structure. These political inequalities have encouraged economic inequality," The Republic of Korea says that economic inequality has intensified since the 1990s as well as political inequality.

In the 2016 Hanyang University dissertation, a survey was conducted on the perception of economic inequality among generations. In the paper, 70 percent of the people held the government responsible for failing to narrow the income gap. So many modern people say that the current government's policy inequality is not helping to bridge the gap between the rich and the poor.

Employment deterioration

The poverty of low-income people is getting worse due to the long-term deterioration of employment in South Korea. Therefore, the government has tried to increase employment every time over the past few years, but no results have been made yet. In an article published in the 2018 Korean Times, the IMF said Korea's income inequality was the lowest among 22 Asian-Pacific countries. In this article, the nation's economic growth is growing fast, but it also talked about inequality in household income due to the difficulty of finding jobs for young job seekers.

Solution

To bridge the gap between the rich and the poor, a universal social safety net needs to be established. South Korea's share of government spending on welfare is among the lowest among OECD countries. There is a need to resolve the gap between the rich and the poor.

The state tries to bridge income inequality and the gap between the rich and the poor by intervening in the market without undermining the flow of the free market economic system.

As a representative economic policy for resolving income inequality, Korea has an income-led growth policy, and disaster support funds from around the world, which were prepared due to economic damage caused by Covid-19, can also be seen as efforts to bridge the gap between the rich and the poor in the short term and in numerical terms by guaranteeing basic income for low-income families.

A 2018 Korea University degree paper conducted a study on how social welfare policies improve economic inequality. The paper says that Korea's economic inequality was 6.6 times different in 1990, but since 2009, it has been more than 10 times different. The universal concept of social welfare was becoming increasingly prominent in the 21st century as economic inequality continued to rise. Here, two countries were cited as examples: Sweden, which developed industrial competitiveness based on marketism and prepared social welfare based on it, and British Empire, which maintained a balance between industrial competitiveness and welfare efficiency. In comparison, the nation was clearly less expensive than this. The paper said that it is necessary to reduce the desire to work as much as possible by increasing the cost of welfare while providing universal welfare, but by dividing the income class differently.

References

South Korea