Value context and insight. lkm@koreatimes.co.kr
Relief measures exacerbate 'pandemic divide'
A cleaner looks down from over a banister at a group of tourists at Incheon International Airport, April 1. Korea Times file
By Lee Kyung-min
By Lee Kyung-min
A slew of unprecedented expansionary fiscal and monetary policies effectuated to help navigate the COVID-19 pandemic have entailed an unintended consequence ― sharper inequality.
The “haves” enjoy increased value of assets ― notably equity and real estate ― with opportunity to further augment their wealth due to the record-low interest rate.
The apparent “boon” highly contrasts with mid- to low earners with precarious living conditions.
Temporary, short-term contract workers as well as workers involved in the manufacturing industry ― the traditional growth driver and job creator of the export-reliant economy ― have been forced into unpaid leave, almost always followed by outright layoffs. The expansionary policy does not help the vulnerable group of people with poor credit and little to no collateral to put up, whom banks consider are borrowers with high default risks, some said.
The so-called “pandemic divide” is illustrated by the bullish sentiment in the property market as well as the local bourse recovering nearly 94 percent recently compared to before the pandemic.
The benchmark KOSPI rose to 2,217, June 8, close to its previous high of 2,267, Jan 22. The figure then tumbled to 1,457, March 19, due to pandemic-sparked panic selling.
The KOSPI slightly slid to 2,132 June 12, driven by concerns that a second wave of the virus could lead to a longer-than-feared economic slowdown. But the drop was limited to 2 percent, and the figure still hovered over 2,100.
The continued months-long decline in apartment prices in Seoul snapped out of the downtrend in the second week of June.
Data from the Korea Appraisal Board showed the price jumped 0.02 percent June 8, from a week earlier, in what market observers say could be the beginning of an end to the 13-week downtrend.
The vibrant market sentiment was enabled mostly by 175 trillion won ($145 billion) financial market stabilization measures as part of 250 trillion won in financial assistance put into place to deal with the pandemic.
This together with a record-low key base rate of 0.5 percent has led to a record-high 3,018 trillion won in M2, a measure of money supply alongside M1.
M1 includes monies that are very liquid such as cash, checkable deposits and traveler's checks whereas M2 money supply encompasses M1 but with less liquid savings, certificates of deposits and money market funds.
The Bank of Korea said M2 in April jumped 1.1 percent, or 34 trillion won, from a month earlier, the highest jump since the central bank began compiling related data in December 2001. On a yearly basis the increase was 9.1 percent, an 8 percent increase for the past three months.
M1 rose to 1,006.3 trillion won in April, up 2.3 percent from the month before.
In a dramatic contrast, mid- to low-income earners are taking the hardest blow. Statistics Korea data showed Korea lost 392,000 jobs in May, a substantial loss that continued for three months after the pandemic.
The data showed 501,000 of those contracted for less than a year of work lost their jobs, much worse than December 1998 amid the Asia financial crisis when the year-on-year loss was 447,000.
Seoul National University Kim So-young said the government should fine-tune measurable ways to properly assist the most in need, rather than implementing blanket measures.
“The growing inequality widened by asset value appreciation is something that cannot be resolved without government efforts. The government needs to come up with a more tailored approach,” Kim said.