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The Namdaemun Market, downtown Seoul.
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Uneven wage distribution means working class families still in the red
The Korean economy has fallen into a systemic trap, in which economic indices continue to be favorable, but the economic effects felt "on the street" continue to become bleaker. In the high-growth period of the past, export growth brought along more investment and jobs, with money going to the middle- and low-income bracket as well as the wealthy. But such positive effects are nowhere to be found now. Growth is rising, but rising up, not spreading out. People are now worried about the economy being imbedded in a ‘low-growth, low-employment’ structure. Larger pie, but where are the pieces going? If the Korean economy grows by 4 percent, the Gross Domestic Product (GDP) will grow to as large as 890 to 900 trillion won (US$900-910 billion) next year. This year’s GDP is expected to reach 806.62 trillion won. In a nutshell, the size of the pie to which everybody can grab at will be 80 to 90 trillion won larger. But when the Hankyoreh looked at household income trends with the help of economic experts, this projected growth was not expected to have any effect on the lives of low income families. According to the survey, the bottom 30 percent of the income bracket (with annual household income of below 22 million won in 2005) will earn 1.11 million won and spend 1.29 million won every month on average, coming up short by about 180,000 won monthly. That is a 5.4-percent of this year’s red-ink monthly figure for this income bracket, and this figure also excludes non-consumption spending, such as all taxes and compulsory insurance. If that is included, the average monthly deficit for these households surpasses 300,000 won.On the other hand, those households in the top 20 percent of earning, with an annual income of above 55 million won, are expected to post a monthly surplus after spending of 2.26 million won next year - 2.1 percent more than this year’s figure. The remaining 50 percent of wage earners, South Korea’s middle-income bracket, will also post a 6.1 percent gain, earning 775,000 won in surplus of expenditures every month over this year’s figure of 730,000 won. These expectations are based on the assumption that the Korean economy will post a 4.7-5 percent growth and 4.0-4.6 percent growth this year and the next, respectively. Song Tae-jeong, a researcher at LG Economic Research Institute, says "Unless the organizational contradictions such as growth in unemployment and in the widespread use of contract employees are resolved, the economic hardship of low-income people will become chronic regardless of economic growth." The low growth, high unemployment trap Experts blame unmployment as the biggest reason for lower-middle and low income earners’ wallets staying thin: labor income makes up about 80 percent of these household’s earnings, employment levels have been in a rut in recent years, and most of the growth in employment is in the low-paying service industry. The government set its new employment target at 350,000 new jobs this year. But by year-end, the actual number of the newly employed will be an estimated 50,000 short of the target. The annual average job growth has fallen from 600,000 in the late 80s and 400,000 in the 90s. Experts also point to lowered hiring rates in the manufacturing industry and overhauls underway in the self-employment sector, namely in retail/wholesale and food service businesses. Manufacturers are implementing technology that uses less labor, and manufacturers of low added-value products are moving overseas in search of cheaper labor. Increased uncertainty due to the shortening in duration of the economic cycle has also caused companies to avoid hiring. In the past, retail/wholesale and food service businesses used to function as safety valves during times of economic downturn. Now, their employment is also slumping, as these businesses are suffering from oversupply. "The slump in the earnings of the working class is not just a matter of the economic cycle," says Ha Jun-kyeong, a researcher at the Korea Institute of Finance. "It is, rather, a structural problem in which the bipolarization into export versus domestic companies and large versus small companies prevents the fruits of growth from being distributed to low-income workers," Ha said. "Korea knows that this is a problem. But it is wandering in the dark, without social consensus, without leadership."
