Park Hyun-ju

By Park Hyun-ju
Yonsei University

Economic polarization describes the increasing gap between the rich and the poor in society that arises from determinants such as income inequality, real-estate fluctuations and displacements in economic choices.

If the middle class disappears, more people living under the poverty line increases and the rich only become wealthier, creating a burden on the economy. In Korea, the increase of the price of real estate had a large impact on the middle class who had to spend most of their savings on purchasing their apartments.

With more people who could not afford the prices, people had to rent homes or spend most of their incomes on it. This had a negative effect on the nation's economy and placed more people under the poverty line.

The saying, ``the rich are getting richer and the poor are getting poorer,'' has recently been an issue as studies have explored the fact that the gap between the incomes of highly skilled workers and low skilled workers is increasing.

Since this is a heavy weight on the economy, it is vital to focus on this issue. One way to reduce economic polarization is education. The modern world imposes the importance of education and also its relation to the job that can be attained.

Free Education

If the government can make a policy that guarantees free education to all children, anybody from any background will have the chance to compete in the labor market. It is fact that a person who has attained a higher level of education gets paid more than a person who hasn't obtained any.

Education is the key to reducing economic polarization.
Education also refers to the awareness to the people of the advancements in technology. To increase the value of skills is therefore also an essential factor in reducing economic polarization.

As there are advancements in technology, skilled workers who can use computers are increasingly in demand, and they replace unskilled workers. If education about new technology was offered to the public, this may have a positive impact in reducing economic polarization.
Poverty may possibly be a trade off for economic growth.

A way to reduce economic polarization may be to limit international trade, as although it can benefit the economy in many ways, its cost happens to be an increase in poverty and unemployment.

The more the country is well off; the more one must pay for labor. Because of the expensive labor in Korea, unskilled workers are demanded from abroad as they are cheaper and plentiful.

Tax on Rich

If this the case, in the long run, this economy would demand less of domestic unskilled workers and more of domestic skilled workers, which introduces the problem of economic polarization.

As there is a larger demand for skilled workers, their incomes tend to increase. As for the unskilled workers, there will be a surplus, which explains unemployment because cheaper workers can be obtained from abroad, and if they are to find a job, they will be paid the minimum wage. International trade must be limited in order to encourage economic growth yet control economic polarization.

In order to reduce economic polarization, a system that may affect the rich but not the poor should be imposed. Raising taxes on luxury goods would have an impact on people who want to purchase them.

Rich people tend to buy expensive cars, designer bags and shoes, while poor people do not demand these at all as they know they cannot afford them. Raising taxes on these goods may give more to the poor as it takes from the rich, and could play a part in reducing economic polarization.

Economic growth is beneficial to society although it shouldn't increase the gap in the incomes between the rich and the poor, as in the long run, this impacts adversely on the economy.

If economic polarization is not given serious attention, there will be more people living under the poverty line and unemployment will only increase. Offering free education to all citizens, lessening international trade and increasing taxes on luxury goods are all hypothetical ways to reduce the gap between the rich and the poor. A healthy economy refers to less people under the poverty line and a low rate of unemployment and these factors would help ensure this.