Working poor’s plight worsens

By Kim Tong-hyung

Fighting unemployment is at the core of the country’s social policy, but the focus must shift more toward tackling poverty among those who are employed, a recent report suggested.

The problem of Korea’s working poor is becoming alarmingly worse, according to Korea Development Institute (KDI) researcher Koh Young-sun, who points out that working-age households account for nearly 90 percent of all families living below the poverty line.

And only about 40 percent of people on poverty-level wages, or less than 50 percent of the median income, have taken out employment insurance, indicating a significant number of low-paid workers are slipping through the social safety net.

Many of the jobs paying low wages are provided by small businesses, as the pay gap between them and large firms widens dramatically. About 19 percent of men working in companies with less than four employees are earning poverty-level wages compared to 39 percent of women, a disturbing number when considering that these companies employ around 40 percent of the country’s workforce.

Having a job no longer guarantees a certain standard of life and there is no clear sign that prospects will improve for low-paid employees.

``A serious concern is that the wage gap between small- and medium-sized enterprises and large firms is continuing to widen. And this doesn’t even account for struggling self-employed people, the unemployed and the economically inactive, who may have it even worse than those working for small firms. This suggests that the country’s inequality and wealth distribution problems will only worsen in the foreseeable future,’’ Koh said.

``The demand for low-skilled workers has been declining consistently since the 1990s, and these workers are now looking for employment in the service sector. However, the pay in service sector jobs was just about 57 percent of that of manufacturing jobs at the end of 2008.”

About one-third of unemployed people and one-fifth of those with precarious jobs are currently living in poverty, according to Koh.

Non-regular workers took home just 46.9 percent of what permanent employees earned last year, declining from 50.1 percent in 2007, according to a separate report based on official data. As of March this year, the highest-paid 10 percent of Korean employees were earning 5.27 times more per hour than the lowest 10 percent, significantly more than the same month in 2008 when they earned 4.86 times more.

The growing poverty among people who are supposedly part of Korea’s active economy raises serious questions over the country’s employment strategy, which is mainly focused on getting more people to work.

``To reduce poverty among working-age people, the country needs to strengthen its activation policy, which is to encourage ‘workfare’ and ‘make-work-pay’ measures. Also required are strengthened social services for job seekers, including consulting, training and job finding, and also better childcare services for working parents,’’ Koh said.

“You can’t tackle the poverty problem with just welfare policies. The uncertainties in macroeconomic policies always hit poor people harder, as was painfully revealed in the Asian financial crisis of the late-1990s, and it’s advisable that the country’s monetary policy prioritize consumer-price instability from here now on.”

Korea is becoming a harder place for poor people to get ahead, which is leading to increasing concerns over widening inequality and reduced social mobility, which have only worsened under the recent recession.

The country’s unemployment rate has grown from 3.2 percent in 2008 to 3.8 as of the first-half of this year.

And the official data doesn’t even fully show the problem as the number of economically inactive people, or those who have given up looking for a job, has reached a staggering level of more than 15 million. When taking first-time jobseekers into account, the country’s “real” inflation rate was approaching 8 percent as of the end of last year.

Youth unemployment is an increasing social problem and many of the new jobs created this year have been precarious and low paying, mostly taken up by middle-aged adults between their 40s and 60s.