More young people feel pessimistic about economy

By Kang Ye-won

A 33-year-old woman, surnamed Park, makes between $40,000 and $45,000 a year from her job in theater marketing. She used to feel comfortable with her lifestyle where she ate out four or five times a week and enjoyed going to movies and concerts in her free time.

The newly-wed, who identified herself as middle class, said she’s worried about her spending now that she and her husband are aiming to buy their own house and possibly have children.
“Whether you own a house says something about your social status,” said Park, who wouldn’t give the remainder of her name.
“Because inflation has spiked in the past couple of years, I feel more squeezed with the same amount of income.”

The so-called, 2040 generation, referring to people in their 20s, 30s and 40s in Korea, is the one that drives the main engine of the economy. However, many of those who regard themselves as middle class are on the brink of slipping to the new poor, said Lee Jun-hyup, a research fellow at Hyundai Economic Research Institute (HRI), in a phone interview.

“The new poor reflects today’s economic situation; they’re the new demographic from the shrunk middle class,” Lee said, characterizing them as highly educated, politically engaged and vocal in expressing their beliefs and concerns.

In 2010, the middle class shrunk to 68 percent of the total population from 75 percent in 1990. The percentage of the poor rose to 13 percent from 7 percent in the same period.

The middle class is defined as people with a disposable income that lies between 50 and 150 percent of the median earning, according to Statistics Korea.

As Park expressed concerns on rising prices, taming inflation was the top priority in economic policy for 2012 as pointed out by President Lee Myung-bak at the beginning of this year.

Consumer prices climbed 4.2 percent in December to place the annual inflation to 4 percent for 2011, according to government data.
The main burden for people like Park is buying a house. When real estate prices surged in 2005 and 2006, many middle class people bought houses that were out of their budget and have been financially pinched since then to become the so-called “house poor,”Lee said.



It refers to people in their 30s and 40s, who often own a house in a metropolitan area but they feel financially squeezed by their mortgage.

The number of the house poor in Korea reached over 1 million in 2010, he said.

Others in the new poor bracket include the “retired poor,” who failed to invest effectively for their retirement, mainly due to supporting their children’s education, he added.

In the meantime, the income gap has continued to widen. The top 20 percent makes more than 7.7 times of the bottom 20 percent, according to Statistics Korea.

People’s perceptions of themselves have changed over time, too.

About 53 percent of people identified themselves as middle class in 2011, compared with 56 percent in 2003, whereas the number of people who thought of themselves as poor increased to 45 percent from 43 percent during the same period, according to a survey by Statistics Korea.

And more people have pessimistic views on social mobility. Only 29 percent said they expect to move up the social ladder whereas a whopping 59 percent answered that it’s unlikely to happen in their lifetime, Statistics Korea found.

Lee Da-som, a 25-year-old, who graduated from the London School of Economics and Political Science, echoed the view that social mobility has become more difficult for today’s 20-somethings.

“Compared to my parents’ generation, Korea has become more stable politically and socially but the government’s support of ordinary people has declined,” Lee said. As a boomerang kid, who moved back to her parents’ house in August, Lee now works for an international company in Seoul.

When talking about social classes, she added, “It shouldn’t be just about financial status. Educational and cultural capital should also be taken into account.”

Kim Kyung-soo, a 49-year-old in the real estate business, agreed that advancing in terms of socioeconomic status is becoming more challenging generation after generation.

“Nowadays, even if you study hard and pass the bar exam, it won’t get you a job,” Kim said. “It’s difficult to move up the social ladder on your own. You need some extra help.”

“The so-called upper class is a subjective term, as it also refers to one’s lifestyle and whether you feel luxurious at heart,” Kim added.

The middle class crisis will become one of the core issues in 2012 when the legislative and presidential elections take place in April and December respectively, experts say.

“In this year’s elections, the key issue is going to be welfare and candidates will debate specific issues rather than engaging in ideological clashes,” said Kim Jeung-kun, a research fellow with Samsung Economic Research Institute (SERI).

“The Buffett tax passed early this year is an example of rising interest in (social welfare) among politicians,” Kim said.

The National Assembly passed the so-called, Buffett tax law this month, which would tax the rich at a rate of 38 percent on annual income of 300 million won ($259,000) or more.

It is named after Berkshire Hathaway Chairman Warren Buffett, who’s been a strong advocate of raising taxes for Americans earning more than $1 million a year.

However, critics say it is expected to apply to only 0.17 percent of high income earners.