[Editorial] Korea’s Shrinking Middle Class

The middle class maintains a balance between social classes and absorbs economic, ideological, and regional conflicts. As the middle class supports civil society, a sense of belonging to this class is critical. If the numbers of this class decrease and its sense of belonging weakens, our society will show signs of risk.

A recent report from the Korean Institute for Health and Social Affairs (KIHSA) shows that the share of Korea’s middle class dropped from 56 percent in 2000 to 44 percent in 2006.

The outcome shows a widening gap between the rich and poor. The result is also frustrating to see at a time when Korea faces an era of $20,000 per capita income. According to the newspaper survey, 48 percent of respondents said they belong to the lower-income class compared to the 42 percent who said they are middle class. Ten years ago, more than two thirds said they were middle-income earners.

What is more disturbing is that the number of people dropping out of the middle class increased and more people living on tight budgets fell into the poorest social bracket. The portion of people in the lower income bracket rose from 34 percent in 2000 to 45 percent in 2006.

Among them, the poorer class rose to 20 percent from 11 percent over the same period. In short, a certain portion of the middle class moved down to the lower class, and the lower class fell down to the poor. President Roh Moo-hyun’s campaign pledge (expanding Korea’s middle class to 70 percent) rings hollow.

To prevent a complete collapse of the middle class, job creation and stable house prices should come first. Investment promotion and pro-growth policies increase the number of jobs. Populism against market principles, disrupting growth potential, and criticizing the upper social classes actually harms the middle class and produces more poor.

Rising house and land prices will discourage people’s willingness to work, and public discontent widens the rich-poor gap. The mechanism whereby rent income from tenants continuously goes to homeowners just widens the gap.

To increase the number of Korea’s middle class earners, the government should face up to reality with a sense of crisis. Koreans have known for many years that provocative political practices criticizing the rich, and socialist and left-wing approaches only escalate the problem.