By Kim Jae-kyoung
Despite President Lee Myung-bak’s campaign for a “fair society,” the nation’s income divide has been deepening following the global financial crisis, with the debt for the middle- and lower-classes having outgrown their income at a much faster pace than wealthy households.
The nation’s Gini coefficient, a barometer for the degree of income inequality, has also been rising, signaling that the income gap between the rich and poor has been widening
According to the Bank of Korea (BOK) and Statistics Korea Monday, the outstanding balance of household debt reached 711.6 trillion won in June, equivalent to 64 percent of the nation’s gross national disposable income (GNDI) of 1,117.1 trillion won.
The figure was up 10 percentage points from 54 percent in June 2003, meaning that household debt has outgrown income over the past several years.
The debts to GNDI ratio has been steadily rising to 61 percent in 2008, 60 percent in 2007, 59 percent in 2006, 56 percent in 2005 and 55 percent in 2004.
It is natural that debts increase in line with a growth in economic size but the problem is that household debts have grown much faster than GNDI.
What is of more concern is that the middle- and lower-classes are exposed to growing debt burden as the rich have benefited most from income growth.
Among five income brackets, the ratio of interest-bearing debts to interest-bearing assets for the first or lowest class reached 6.67 in 2008, while that for the fifth or highest class stood at 3. This suggests that the debt burden for the lowest class is more than twice that for the richest group.
The nation’s Geni coefficient reached 0.350 last year, up from 0.298 in 1996. The coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality.
The Lee Myung-bak administration’s growth-oriented policy is one of the key culprits behind the widening income gap. It has helped the country recover fast from the crisis but widened the economic polarization. Only the rich and large firms are enjoying the benefit from the economic rebound, while smaller firms and the poor are still struggling to stay afloat.
The deepening income divide is what is behind the President Lee’s shift of its economic policy.
Lee is pitching for a fair society that he says will call on the vested interest of society such as conglomerates to share their wealth with the less fortunate.
His administration has shifted the focus of policy to supporting the working class and maintaining a balance between growth and distribution from just stimulating economic growth.
To that end, it introduced a series of policies aimed at boosting the job creation, stabilizing prices and strengthening the social safety net.
In a biweekly radio address Monday, he pointed out the effects of an economic recovery have yet to reach the working class and other low-income people, saying, “I feel a heavy burden as the warmth of (economic) growth has not spread evenly,”