Posted : 2008-07-14 18:42
Updated : 2008-07-14 18:42

Koreas Income Gap 3rd Largest in OECD

By Lee Hyo-sik
Staff Reporter

South Korea has the third largest income disparity between the rich and poor among the Organization for Economic Cooperation and Development (OECD), despite the previous administration's policy priority on the redistribution of wealth over the past five years.

Also, one out of every four workers here are making less than two-thirds of the average income, the highest ratio of low-income earners to the workforce in the OECD.

According to the Ministry of Strategy and Finance Monday, the top 10 percent income bracket earned 4.51 times more than the bottom 10 percent in 2005, up from 3.64 times 10 years ago. It was the third largest gap among the 30 OECD member economies after Hungary with 5.63 times and the United States with 4.86 times. The OECD average stood at 3.39 times.

Northern European nations posted a relatively narrower income disparity. Norway recorded the lowest wealth gap between the haves and have-nots as its top 10 percent of earners made only 2.21 times more than the bottom 10 percent. Sweden posted a 2.23 times income gap and Finland, 2.33.

The wealth disparity here has widened since the 1997-98 Asian financial crisis as poorer households face a harder time making ends meet amid slow income growth on the sluggish job market and rising costs of goods and services. But the rich have become richer as they have been able to accumulate more wealth through stock and real estate investment.

The finance ministry attributed Korea's widening wealth gap to the expanding productivity difference between large and small businesses, as well as between export-oriented manufacturers and domestic market-focused service providers.

``Following the currency crisis in late 1990s, the productivity gap between large and small companies has widened at a faster pace than other OECD members. Higher productivity translates into larger revenues for companies and bigger paychecks for workers. Those who work for large businesses here make more money than employees of smaller companies,'' a ministry official said.

He also said workers engaging in the manufacturing sector tend to earn more than those in the service sector.

According to the Korea Institute for Industrial Economics and Trade, labor productivity in the manufacturing industry rose at an annual average of 8.8 percent from 1996 through 2006, while the service industry productivity increased 1.8 percent on average over the same period.

Last year, labor productivity growth among large business groups averaged 12.5 percent, while the productivity of smaller firms grew only 3.3 percent.

Meanwhile, a growing portion of salaried workers here are making less money as they have no choice but to take either non-regular or temporary positions amid the tight job market, further widening the income gap between the haves and have-nots.

Employees who earn less than two-thirds of the nation's median income accounted for 25.4 percent of the total salaried workers in 2005, the highest among the OECD member economies. The United States came in second with 24 percent, followed by Poland with 23.5 percent and Canada with 22.2 percent.

In Sweden, only 6.4 percent of salaried workers made less than two-thirds of the average income, indicating a relatively fairer income distribution.
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