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A citizen sitting on a bench in a building.
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Rate of improvement much lower than other nations
Although the government of President Roh Moo-hyun has placed priority on ensuring the equal distribution of income, little improvement has been made in the first three years of his term to better the situation. Experts place the blame on the rapid economic polarization after the 1997-98 Asian financial crisis, as well as a lack of social safety nets. The Gini coefficient, which measures inequality of income among households in a nation, can also be used to determine the efficacy of inequality reduction policies. This is done through measuring the percentage of change in the coefficient after the process of taxation and redistribution of income through social welfare programs. According to a report by the Ministry of Finance and Economy, during the first two years of President Roh’s term, 2003-05, the Gini coefficient registered an average rate of improvement of 3.2 percent after taxation and redistribution. This percentage of improvement in the Gini coefficient is significantly low when compared with other advanced nations. According to the ministry’s data, the improvement in this coefficient in Sweden and Germany in 2000 through taxation and redistribution was 35.5 percent and 30.8 percent, respectively. The average rate of improvement among 15 selected Organization for Economic Co-operation and Development (OECD) nations was 26.1 percent. In case of the U.S. and Japan, which have relatively weak social safety nets, their rate of Gini coefficient improvement was 17.6 percent and 14.4 percent, respectively. The improvement of this coefficient during President Roh’s term is only slightly higher than the 2.3 percent average improvement registered during the prior president Kim Dae-jung’s term.The closer the Gini coefficient is to 1.0, the more unequal a society’s income distribution. The average "market income Gini coefficient," which measures inequality of income distribution before state subsidies are given out, was 0.311 between 2003 and 2005. In comparison, the average "disposable income Gini coefficient," which measures inequality of income distribution after the reciept of state subsidies, was 0.301 for the same period. These nearly matching figures explain the low rate of improvement in income distribution in South Korea. Ministry officials attributed this narrow improvement to a rapid economic polarization and a lack of government-regulated social safety nets. Amid the rise of information technology and globalization, economic growth creates fewer jobs and plays a weaker role in distributing income, the ministry said. The government’s decreased spending on welfare was also cited by financial experts as a culprit. The growth rate of the welfare budget during the Roh Moo-hyun government was slower than that of the Kim Dae-jung government. Between 1997 and 2002, the welfare budget grew at an annual average rate of 16.1 percent to 37 trillion won (US$39 billion) in 2002. In comparison, this budget grew at an annual average rate from 2003-07 of 12.8 percent to 61.3 trillion won in 2007. Ha Joon-kyeong, a researcher at the Korean Finance Research Institute, said, "During the tenure of the current government, there were talks regarding income distribution. However, the distribution policies did not gain momentum due to a failure to reach a social consensus." Please direct questions or comments to [englishhani@hani.co.kr]
