Middle Class Declines from 56 Percent to 44 Percent in 10 Years

Research results show that during the last 10 years, Korea’s middle classes showed a considerable decrease, while the upper and lower classes increased. During the same period, the number of poor increased two-fold.

The Korea Institute for Health and Social Affairs (KIHASA) announced their “Research Report on Social Polarization Status and Policy Priorities” on March 18. This report was created through analysis of studies on household consumption conditions and household research conducted by the Korea National Statistics Office and also research on national living conditions conducted by the KIHASA.

The thinning middle of society–

This report divided society into four groups: the upper class, middle class, mid-lower class, and the poor. Those whose incomes were greater than 150 percent of the national average were classified as upper class, 70 – 150 percent the middle class, 50 – 70 percent the mid-lower class, and less than 50 percent were classified as the poor.

According to this report, the rate of the middle class dropped significantly, from 55.5 percent in 1996 to 43.7 percent in the first half of 2006. The numbers themselves show a difference of 11.8 percent, but the decrease rate is 21.3 percent, meaning that two people out of ten moved out of the middle class. The mid-lower class also decreased from 13.2 percent to 11 percent during the same period.

On the other hand, the poor increased nearly two-fold, from 11.2 percent to 20.1 percent in ten years. The upper class also increased by over five percent, from 20.1 percent to 25.3 percent. This can be interpreted as widening of gap between rich and poor by movement of the middle classes to the upper class and the poorer classes.

In an investigation regarding movement between classes since 2004, more households moved up than down. From 2003 to 2004, the rate of upward movement was higher than that of downward movement by 0.1 percentage points, and from 2004 to 2005 the downward movement rate was greater by 0.6 percentage points. From 2005 to 2006, the rate of upward movement was higher by 7.7 percentage points.

Among the households that moved upward, many showed high employment rates, high education levels, or a greater number of members. On the other hand, households consisting of elderly members or younger members showed greater rates of downward movement.

A close look at the types of employment of household heads shows that those in the construction industry, the wholesale and retail trade, real estate leasing business, and the service industry have a greater probability of moving downward than those in the manufacturing industry. Those working in real estate leasing and construction actually turned out to be more than twice as likely as those working in manufacturing to move downward.

When the heads of families were female, the fluctuation of income was greater, thus resulting in greater rates of upward or downward movement.

Medical polarization also serious –

The study results showed that the higher the income, the better the individual’s health status. From an analysis of health levels in relation with income using national health and nutrition studies conducted in 1998, 2001, and 2005, it was shown that the rate of satisfactory health in the lower tenth percentile was lower than half the national average (46.5 percent) at 22.1 percent. A comparison of this number to those of 1998 (34.7 percent) and 2001 (29.7 percent) reveals that the health of the lower class has deteriorated greatly.

In contrast, 56.2 percent showed satisfactory health in the upper tenth percentile, an increase from 52.0 percent in 1998.

As of 2005, the number of days spent in bed sick was 19.36 days for the lower tenth percentile, while for the upper tenth percentile it was only 3.04 days. The number of chronic diseases was 3.61 for the lower tenth percentile and only 1.96 for the upper tenth percentile. As for checkups, 63.3 percent of the upper tenth percentile and 39.8 percent of the lower tenth percentile had had medical examinations.

Housing problems also in bad state –

Residential polarization due to skyrocketing real estate prices has also become serious. As of 2006, 51 percent of the poor, 49.1 percent of the mid-lower class, 57.2 percent of the middle class, and 65.2 percent of the upper class were homeowners. The residential property average of the lower tenth income percentile was 46.3 million won, and for the upper tenth percentile, it was nearly ten times this amount at 423.5 million won.

The poor showed the greatest rate of living in single-family residences (as opposed to residential complexes such as apartments) at 61.2 percent, and the upper class ranked the lowest at 31.8 percent. Some 55.5 percent of the upper class lives in areas where real estate prices were increasing steeply. Only 21.5 percent of the poor live in apartments.

The rate of residences falling under the minimum residential standards specified by housing laws was the highest in the lower tenth percentile at 46.7 percent; for the upper tenth percentile it was only 6.1 percent. Among the poor, it was not rare to find people having difficulty paying for housing.

Kang Shin-wook, head of the public assistance team in the KIHASA, said, “Polarization has become worse in the recent ten years, and income distribution is becoming worse as well in classes other than the extremely poor. Many people are in danger of poverty, so policies must be created to prevent the mid-lower and middle classes from moving into the poor class and help upward movement among groups.”

pen@donga.com