Government should reconsider 'income-led' policy
The income disparity between the rich and the poor has widened, despite efforts by the liberal Moon Jae-in administration to narrow it.
According to Statistics Korea, the gap between the disposable income of the top 20 percent and that of the bottom 20 percent of households widened to 5.95 times in the first quarter. The difference compares with the 5.35 times a year ago and 5.02 times in the same period of 2016, and is the widest since the government began compiling relevant statistics in 2003.
The discrepancy is even more severe in nominal income. The nominal income of the poorest 20 percent families fell 8 percent to 1.28 million won ($1,185) a month, while that of the wealthiest 20 percent rose 9 percent to 10.15 million won year-on-year in the first three months.
These numbers should be more than just embarrassing for President Moon, whose "income-led" growth policy has put a priority on narrowing the gap between the high- and low-income brackets.
Economic officials ascribed the worsening income distribution to the sharp increase in the number of households led by people aged 70 or older.
Population aging and other demographic changes could be part of the reasons. However, policymakers need to check the possibility the income-led policy has worked to aggravate fair redistribution. Private experts have pointed out the policy reduced jobs in the services sector, such as restaurants, lodgings, and retail and wholesale businesses. Hit hardest by the job losses in these industries are the bottom 20 percent of households.
It would be hasty, of course, to conclude the government's policy resulted in exacerbating income distribution with just the three-month figures. However, one thing seems inevitable _ fair redistribution is not going as the government wants it to be. Policymakers should revisit their policy and make a correct diagnosis to find the right remedy. Finance Minister Kim Dong-yeon recently hinted at slowing down the hikes in the minimum wage, which is a move in the right direction.
The stark contrast between booming exports and slumping domestic demand is making things worse. Bold deregulation will help struggling services businesses targeting local consumers.
The government ought not to waste any more time in seeking the advice of private economists to find a quick solution.
The income disparity between the rich and the poor has widened, despite efforts by the liberal Moon Jae-in administration to narrow it.
According to Statistics Korea, the gap between the disposable income of the top 20 percent and that of the bottom 20 percent of households widened to 5.95 times in the first quarter. The difference compares with the 5.35 times a year ago and 5.02 times in the same period of 2016, and is the widest since the government began compiling relevant statistics in 2003.
The discrepancy is even more severe in nominal income. The nominal income of the poorest 20 percent families fell 8 percent to 1.28 million won ($1,185) a month, while that of the wealthiest 20 percent rose 9 percent to 10.15 million won year-on-year in the first three months.
These numbers should be more than just embarrassing for President Moon, whose "income-led" growth policy has put a priority on narrowing the gap between the high- and low-income brackets.
Economic officials ascribed the worsening income distribution to the sharp increase in the number of households led by people aged 70 or older.
Population aging and other demographic changes could be part of the reasons. However, policymakers need to check the possibility the income-led policy has worked to aggravate fair redistribution. Private experts have pointed out the policy reduced jobs in the services sector, such as restaurants, lodgings, and retail and wholesale businesses. Hit hardest by the job losses in these industries are the bottom 20 percent of households.
It would be hasty, of course, to conclude the government's policy resulted in exacerbating income distribution with just the three-month figures. However, one thing seems inevitable _ fair redistribution is not going as the government wants it to be. Policymakers should revisit their policy and make a correct diagnosis to find the right remedy. Finance Minister Kim Dong-yeon recently hinted at slowing down the hikes in the minimum wage, which is a move in the right direction.
The stark contrast between booming exports and slumping domestic demand is making things worse. Bold deregulation will help struggling services businesses targeting local consumers.
The government ought not to waste any more time in seeking the advice of private economists to find a quick solution.
