By Kim Tae-jong
Mounting household debt has been increasing the gulf between the rich and the poor, deepening economic polarization here, as shown in the latest data.
According to Statistics Korea, the Gini coefficient based on household debt increased to 0.801 last year from 0.710 in 2006, meaning that more people bought houses with a mortgage.
During the same period, the Gini coefficient based on housing dropped to 0.700 in 2011 from 0.715 in 2006. The two data combine to suggest that people’s assets grew after the purchase of homes but their debts jumped.
In other words, the gap between rich and poor has been deteriorating as debt burdens have hurt household balance sheets amid a prolonged slump in the real estate market.
“Disposable income-based Gini coefficient showed that inequality has narrowed but it is necessary to take into consideration the mounting household loans,” said Yoo Kyung-won, a professor at Sangmyung University.
The Gini coefficient is a measure of statistical dispersion to show inequality. Zero expresses perfect equality while one expresses maximum inequality.
The Gini coefficient based on the disposable income of households nationwide stood at 0.311 in 2011, down from 0.312 in 2007,. The index moved in the range between 0.310 and 0.314 between 2008 and 2010 when the nation was hit by the global financial crisis.
The Gini coefficient based on the households’ net asset also declined to 0.632 in 2011 from 0.643 in 2010 and 0.662 in 2006.
Based on drops in these figures, the government says the inequality problems have been eased or at least have not worsened.
But Yoo argues that the numbers undervalue the growing household debt related to mortgages.
“It is wrong to take such figures at face values,” he said in a contribution story to the report by the Korea Economic Research Institute.