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By Park Hyong-ki
The rich have become a lot richer, and the poor have become a lot poorer as seen in the latest data from the state-run Statistics Korea.
As a result, the country now faces the worst income inequality in 11 years.
This is mainly because of the weakening job market, which has further reduced the disposable incomes of young, single households, the statistics agency said on Nov. 22.
They are usually included in the bottom 20 percent income group whose average monthly income dropped 7 percent to 1.3 million won in the third quarter of 2018, from a year earlier.
Their incomes have been falling for three straight fiscal quarters.
The top 20 percent group's monthly income averaged 9.7 million, up nearly 9 percent in the same period.
"Unemployment and sluggish consumption are making the low-income group worse off," said Park Sang-young of Statistics Korea.
He pointed to data showing a decline in the number of hired office workers in the low-income group, accounting for 5 percent of the total jobs in the third quarter, down from 8.2 percent a year ago.
The widening income gap is also in part due to the high elderly poverty rate, which stands at 46 percent, far above the OECD average of 13 percent, analysts say. The average age of the low-income group is over 60 years old.
In September, the country raised the basic pension for the elderly to 250,000 won per month from 200,000 won. Also, it will give 100,000 won per month to households with children under 5 years old, depending on their income level.
However, Statistics Korea said it would have to wait to see their effects on the incomes of the bottom 20 percent.
Analysts say President Moon Jae-in's income-led growth policy backed by fast minimum wage hikes aimed at reducing inequality has failed, given the worsening data.
Instead of narrowing the gap and boosting consumption as intended, it has weakened domestic demand as companies became reluctant to invest and hire amid the wage hikes and the U.S.-China trade conflict, they said.
"Hikes in the minimum wage should be moderated to avoid negative effects on employment," the OECD said in a report.
"The income-led growth strategy, driven by minimum wage increases and higher public employment and social spending, needs to be supported by reforms to narrow productivity gaps between manufacturing and services, and between large and small firms."
Moody's Investors Service said weak job creation will continue to weigh on consumption, while the aging population poses a long-term risk to the economy.
"The hikes were too much for the economy to manage and handle, while facing a slowdown," said Sung Tae-yoon, an economist at Yonsei University.
He added the President's second economic team needs to readjust and reprioritize its policy, and implement effective social measures to tackle inequality and poverty.
Hong Nam-ki, a nominee for finance minister, will soon be replacing Kim Dong-yeon after Hong goes through a confirmation hearing early December.
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