By Park Yoon-bae
The widening wealth and income gap has become a global phenomenon amid the prolonged COVID-19 pandemic. It is sad to see the devastating economic impact of the public health crisis making the rich richer and the poor poorer.
According to the World Inequality Report 2022 by the World Inequality Lab, the richest 10 percent of the global population own 75 percent of all wealth in the world this year, up 0.4 percentage points from 2019. On the other hand, the poorest half possess a meager 2 percent of the total, staying at the same level as in the pre-pandemic year.
More specifically, the top 10 percent's wealth is valued at an average of 550,900 euros (730 million won) per person, 190 times the average 2,900 euros for each person in the bottom 50 percent. The report also found that the average income of the individuals who make up the top 10 percent of the global income is 38 times higher than that of the poorer half.
South Korea is no exception. The richest 10 percent of Koreans own 58.5 percent of the entire wealth of the county in 2021, up 0.1 percentage points from 2019. However, the poorest half's wealth accounts for only 5.6 percent of the total. Each person in the top 10 percent bracket is in possession of an average 1.4 billion won in assets, compared with 27 million won for each individual in the bottom 50 percent.
The findings explain why nongovernmental organizations like Oxfam are describing the coronavirus as the "inequality virus." The pandemic itself does not discriminate based on wealth and income. Yet, its economic fallout has contributed to deepening inequality.
It is worth noting what the report states: "Inequality is a political choice, not an inevitability." In other words, human societies can narrow or widen wealth and income disparity, depending on what policies they adopt.
The report said that Europe is the "most equal" region in the globe with the richest 10 percent of its population occupying nearly 36 percent of the region's total income share. Historically, a number of countries in Europe have been lauded for building welfare states by redistributing wealth through increased taxation.
One of the interesting findings is that South Korean adults' average annual income based on purchasing power parity (PPP) is estimated at 33,000 euros (38.43 million won), higher than Britain's 32,700 euros, Spain's 30,600 euro and Italy's 29,100 euros. But Korea's income gap was much wider than that of Europe as a whole, with the country's richest 10 percent representing 46.5 percent of the total income share.
The average annual income of the top 10 percent of Korea's wealthiest is estimated at 178.5 million won, about 14 times higher than the 12.33 million won of the bottom 50 percent. This gap was much higher than that of France by a factor of seven, those of Italy and Spain by a factor of eight, that of Britain by a factor of nine and that of Germany by a factor of 10.
As the report pointed out, South Korea has suffered from this widening income disparity because it failed to create a sufficient social safety net between the 1960s and the 1990s, despite its rapid economic development.
In fact, Korea's economic structure has deepened the concentration of wealth in the hands of a small number of wealthy families that own and control conglomerates such as Samsung, Hyundai, LG, SK and Lotte. The country has neglected to redistribute wealth through a fair taxation system.
Against this backdrop, the proportion of the middle class ― the backbone of democracy ― has continued to decline since it hit 71 percent in 1995. The ratio fell to 64 percent during the 1997-98 Asian financial crisis that prompted mass layoffs amid a series of corporate bankruptcies. It slid further to 52 percent in 2019.
As in many other countries, South Korea has witnessed additionally widening inequality during the pandemic. The government's fiscal expansion and the central bank's monetary easing have created excess liquidity, causing an upsurge in property values and stock prices.
As a result, the rich have taken advantage of the public health crisis to increase their wealth, while the poor have suffered the most from the COVID-19 shock.
Home prices have skyrocketed since the Bank of Korea cut its key interest rate to a record low of 0.5 percent in May 2020 and the government provided an astronomical amount of stimulus packages and relief funds to businesses and individuals.
The Moon Jae-in administration's ill-conceived anti-speculation policy of imposing heavier property taxes on homeowners has added fuel to the fire. All this has done is widen the gap between rich and poor.
Now the question is how to narrow that gap. Most of all, the country should push for tax reform to promote the redistribution of wealth and provide more welfare programs to help the poor.
It is also urgent to expand the social safety net to provide better protection for the unemployed and the underprivileged. Equally important is creating more jobs, especially for young adults.
Presidential candidates of the ruling and opposition parties should engage in active discussions over how to tackle Korea's significant inequality issues. They must keep in mind that the country cannot achieve social cohesion and national unity without bridging the rich-poor divide.
The author (byb@koreatimes.co.kr) is the chief editorial writer of The Korea Times.
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According to the World Inequality Report 2022 by the World Inequality Lab, the richest 10 percent of the global population own 75 percent of all wealth in the world this year, up 0.4 percentage points from 2019. On the other hand, the poorest half possess a meager 2 percent of the total, staying at the same level as in the pre-pandemic year.
More specifically, the top 10 percent's wealth is valued at an average of 550,900 euros (730 million won) per person, 190 times the average 2,900 euros for each person in the bottom 50 percent. The report also found that the average income of the individuals who make up the top 10 percent of the global income is 38 times higher than that of the poorer half.
South Korea is no exception. The richest 10 percent of Koreans own 58.5 percent of the entire wealth of the county in 2021, up 0.1 percentage points from 2019. However, the poorest half's wealth accounts for only 5.6 percent of the total. Each person in the top 10 percent bracket is in possession of an average 1.4 billion won in assets, compared with 27 million won for each individual in the bottom 50 percent.
The findings explain why nongovernmental organizations like Oxfam are describing the coronavirus as the "inequality virus." The pandemic itself does not discriminate based on wealth and income. Yet, its economic fallout has contributed to deepening inequality.
It is worth noting what the report states: "Inequality is a political choice, not an inevitability." In other words, human societies can narrow or widen wealth and income disparity, depending on what policies they adopt.
The report said that Europe is the "most equal" region in the globe with the richest 10 percent of its population occupying nearly 36 percent of the region's total income share. Historically, a number of countries in Europe have been lauded for building welfare states by redistributing wealth through increased taxation.
One of the interesting findings is that South Korean adults' average annual income based on purchasing power parity (PPP) is estimated at 33,000 euros (38.43 million won), higher than Britain's 32,700 euros, Spain's 30,600 euro and Italy's 29,100 euros. But Korea's income gap was much wider than that of Europe as a whole, with the country's richest 10 percent representing 46.5 percent of the total income share.
The average annual income of the top 10 percent of Korea's wealthiest is estimated at 178.5 million won, about 14 times higher than the 12.33 million won of the bottom 50 percent. This gap was much higher than that of France by a factor of seven, those of Italy and Spain by a factor of eight, that of Britain by a factor of nine and that of Germany by a factor of 10.
As the report pointed out, South Korea has suffered from this widening income disparity because it failed to create a sufficient social safety net between the 1960s and the 1990s, despite its rapid economic development.
In fact, Korea's economic structure has deepened the concentration of wealth in the hands of a small number of wealthy families that own and control conglomerates such as Samsung, Hyundai, LG, SK and Lotte. The country has neglected to redistribute wealth through a fair taxation system.
Against this backdrop, the proportion of the middle class ― the backbone of democracy ― has continued to decline since it hit 71 percent in 1995. The ratio fell to 64 percent during the 1997-98 Asian financial crisis that prompted mass layoffs amid a series of corporate bankruptcies. It slid further to 52 percent in 2019.
As in many other countries, South Korea has witnessed additionally widening inequality during the pandemic. The government's fiscal expansion and the central bank's monetary easing have created excess liquidity, causing an upsurge in property values and stock prices.
As a result, the rich have taken advantage of the public health crisis to increase their wealth, while the poor have suffered the most from the COVID-19 shock.
Home prices have skyrocketed since the Bank of Korea cut its key interest rate to a record low of 0.5 percent in May 2020 and the government provided an astronomical amount of stimulus packages and relief funds to businesses and individuals.
The Moon Jae-in administration's ill-conceived anti-speculation policy of imposing heavier property taxes on homeowners has added fuel to the fire. All this has done is widen the gap between rich and poor.
Now the question is how to narrow that gap. Most of all, the country should push for tax reform to promote the redistribution of wealth and provide more welfare programs to help the poor.
It is also urgent to expand the social safety net to provide better protection for the unemployed and the underprivileged. Equally important is creating more jobs, especially for young adults.
Presidential candidates of the ruling and opposition parties should engage in active discussions over how to tackle Korea's significant inequality issues. They must keep in mind that the country cannot achieve social cohesion and national unity without bridging the rich-poor divide.
The author (byb@koreatimes.co.kr) is the chief editorial writer of The Korea Times.
