Gap between Rich and Poor Reaches the Level of Financial Crisis

The prolonged economic recession is intensifying the phenomenon of the rich getting richer and the poor getting poorer.

In particular, the monthly income gap between the highest-income bracket and that of the lowest among urban worker households in the third quarter (July-September) has grown to the level of that during the financial crisis.

This shows the fact that even though the government is stressing the need for “reducing the gap between the rich and poor” and “distribution,” the livelihood of ordinary people is exacerbating amid the economic slowdown.

According to the “2004 3Q Households’ Total Income and Expenditure Trend” released by the National Statistical Office on December 2, among urban worker households nationwide, the average monthly income of the top 10 percent recorded 7.423057 million won, a 7.6 percent growth year-over-year from last year’s 6,900,411 won.

On the other hand, the increase of the bottom 10 percent fell short of 3.1 percent, from 796,192 won to 820,814 won.

Over the same period, the average monthly income of workers in urban areas rose by 6.5 percent, from 3.01568 million won to 3.215494 million won. The income growth of high income households exceeded the average while that of the low-income group was below half of the average.

Accordingly, the income ratio of the top 10 percent to the bottom 10 percent is also rising.

The income ratio in the third quarter of this year recorded 9.04, the first to surpass 9.0 since the inauguration of the incumbent administration. The ratio in the third quarters of 2002 and 2003 were 8.11 and 8.67, respectively.

The higher the income ratio, the bigger the gap between the rich and the poor.

The third quarter income ratios of 1996 and 1997 were 6.95 and 6.94 respectively, but the financial crisis drove it as high as 9.39, and it remained around the range of 8.0 except during 2001 (9.12) following the venture bubble collapse.

One reason for the increased income ratio in the third quarter this year may be, aside from the sluggish economy, the change in employment pattern since the financial crisis that resulted in conspicuous wage polarization.

Another reason could be that the highest-income families gained more chances to increase their income, whereas those of the low-income group, most of whom are under temporary employment, are suffering from employment uncertainties.

LG Economic Research Vice Chief Researcher Song Tae-jeong pointed out, “A series of regulations on real estate speculation has aggravated the construction sector, which in turn is having adverse effects on the jobs of temporary daily workers.”

Ji-Wan Cha cha@donga.com