Economic polarization worsening

A senior citizen in poverty sits in his shabby house. Nearly half of senior citizens in the country are in relative poverty, earning less than half of the median income. / Korea Times photo by Hong In-ki

Jobless young people add to burden of their poor parents

By Yoon Ja-young

The gap between the haves and have-nots is widening, with doors shut for poor households trying to get out of poverty. Nearly half of young people start their careers as irregular workers and they have to continue relying on their parents due to their low income.

According to a report by Yoon Sung-joo, head of Fiscal Analysis Center at the Korea Institute of Public Finance, only 6 percent of poor households succeeded in getting out of poverty during the past nine years since the global financial crisis. It is based on a panel study between 2007 and 2015, which calculated the probability of households in each income bracket moving to the other brackets.

It showed 57.9 percent of the households in the bottom 10 percent income bracket had remained there after a year. The second-lowest income bracket was hardly better off. It turned out they are more likely to get poorer than better. Only 19.3 percent of those in the second-lowest income bracket moved up to the third-lowest income group, while 22.7 percent of them moved down to the lowest income group.

The middle class also showed signs of collapsing. For those in the fourth to eighth income brackets, the probability of moving down was greater than moving up.

For those in the bottom three brackets, which the report defined as households in poverty, 86.1 percent remained in poverty while only 6.8 percent succeeded in escaping.

Yoon said society is losing vitality.

“With the probability of climbing the ladder to a higher income bracket decreasing, society is losing vitality. The lack of vitality is behind the demolition of the middle class and the polarization,” he noted.

“Jobs are a crucial determinant of poverty, and the government should intervene with both direct and indirect support there.”

He added that poverty can remain permanent through generations as the children of the poor households tend to get a low level of education.

A report released by Shinhan Bank also showed a widening gap.

Based on the analysis of 20,000 customers aged between 20 and 64, the bank noted the households in the high-income bracket of over 7 million won monthly income had income growth of 350,000 won this year from the previous year. However, those earning below 3 million won had an income drop of 70,000 won.

The average income of the high-income group recorded 10.03 million won, while that of low-income households was 1.86 million won. It means high-income households make 5.4 times more money than those in the low-income group. In its previous version of the report, the gap was 5 times.

When the economy was growing steeply the country had vital mobility between classes, there were many young successful people who pulled the whole family out of poverty. Such success stories have become rare as most young people now struggle to get a decent job. A Shinhan Bank report showed that young people spend on average 1.1 years unemployed before they land their first job. Among those who succeed in getting a job, 40 percent got irregular jobs.

Hong Jun-pyo, a research fellow at Hyundai Research Institute, said the poverty of the young people is transmitted to their parents.

“Due to deteriorating jobs and income, more young people live with their parents while the income of the elderly people who support those young people has decreased,” he said.

The report showed that 45.6 percent of single people in their 30s here live with their parents. More than half of them chose to do so due to financial reasons.

“The parents get jobs to support their children, but they are mostly working as simple laborers instead of getting white collar jobs,” Hong said, noting that Korea’s senior citizens face huge burden.

According to the Organization for Economic Cooperation and Development (OECD) the relative poverty rates of those aged between 66 and 75 was 42.7 percent in Korea, the highest among OECD members and four times higher than the OECD average of 10.6 percent. Relative poverty rates measures the ratio of those earning less than 50 percent of the median income. The suicide rates of senior citizens aged 65 or older is also three times the OECD average.