Backbone of Korean society is collapsing
Korea's middle class is faltering. The share of households with their income reaching between 50 percent and 150 percent of the median income fell to 58.3 percent of the total in the second quarter. That marked a decline of 1.9 percentage points from a year ago, hitting an all-time low. The median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. International practices define the middle class as families that earn between 50 percent and 150 percent of the median income.
The number of middle-class households peaked at 67.9 percent in 2015 and has since been on a steady decline. The drop has become notably steeper since the Moon Jae-in administration took office in 2017. The dwindling middle-class results in the polarization of society, aggravates conflicts among classes and weakens domestic demand, adversely affecting the national economy. That, in turn, leads to the shrinkage of private consumption and the reduction of corporate sales and jobs in a vicious circle. Which explains why economic policymakers should hurry to diagnose causes and come up with remedies.
Nonetheless, the Ministry of Economy and Finance says the shrinking middle class is a globally common phenomenon caused by globalization and automation. The Moon administration does not even acknowledge the aggravating income distribution, looking away from the continuous fall in the share of households that earn barely 50 percent of the median income. The government also attributes the shrinking middle class to an increase in jobless families and single-person homes resulting from population aging. The proportion of one-person households indeed rose from 20.7 percent in 2013 to 29 percent now. However, private economists cite the overall business slump and a steep rise in the minimum wage as more significant reasons.
If the middle class as the backbone of society crumbles, the escalating class conflicts could threaten political stability. Government officials should face up to the reality that their income-led growth policy has been eroding the middle class contrary to their initial intention. The Moon administration should do all it can to re-expand the middle class by reviving businesses' investment mindset and increasing jobs.
Korea's middle class is faltering. The share of households with their income reaching between 50 percent and 150 percent of the median income fell to 58.3 percent of the total in the second quarter. That marked a decline of 1.9 percentage points from a year ago, hitting an all-time low. The median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. International practices define the middle class as families that earn between 50 percent and 150 percent of the median income.
The number of middle-class households peaked at 67.9 percent in 2015 and has since been on a steady decline. The drop has become notably steeper since the Moon Jae-in administration took office in 2017. The dwindling middle-class results in the polarization of society, aggravates conflicts among classes and weakens domestic demand, adversely affecting the national economy. That, in turn, leads to the shrinkage of private consumption and the reduction of corporate sales and jobs in a vicious circle. Which explains why economic policymakers should hurry to diagnose causes and come up with remedies.
Nonetheless, the Ministry of Economy and Finance says the shrinking middle class is a globally common phenomenon caused by globalization and automation. The Moon administration does not even acknowledge the aggravating income distribution, looking away from the continuous fall in the share of households that earn barely 50 percent of the median income. The government also attributes the shrinking middle class to an increase in jobless families and single-person homes resulting from population aging. The proportion of one-person households indeed rose from 20.7 percent in 2013 to 29 percent now. However, private economists cite the overall business slump and a steep rise in the minimum wage as more significant reasons.
If the middle class as the backbone of society crumbles, the escalating class conflicts could threaten political stability. Government officials should face up to the reality that their income-led growth policy has been eroding the middle class contrary to their initial intention. The Moon administration should do all it can to re-expand the middle class by reviving businesses' investment mindset and increasing jobs.
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