Posted May. 22, 2009 19:50,
The Gini coefficient of urban households edged up to 0.325 last year from 0.324 in 2007. Though a meager rise of 0.001 point, this is cause for concern given that the index has risen for five consecutive years and last years figure was the largest since the statistic was introduced in Korea in 1990. A coefficient close to one means aggravating income disparity, with a figure exceeding 0.35 signifying severe inequality of wealth distribution. Given this, Korea last year suffered considerable inequality in income distribution. The wealth gap between the haves and have-nots has widened under the pragmatic Lee Myung-bak administration as well.
The economic crisis is blamed for the widening wealth gap. The economically vulnerable are nearing the brink of collapse, with temporary and day workers losing their jobs and poor self-employed people going under. On the contrary, those with deep pockets are buying stocks and real estate at discount prices. By doing so, they are taking advantage of the economic downturn and accumulating more wealth. If the economy falters, the poor are hit the hardest. In the wake of the 1997 financial crisis, the average real income of households plunged 20 percent, but that of the bottom 10 percent of the income bracket plummeted 34 percent. It took five years on average for most of the households to regain their incomes to levels before the financial crisis. It took 11 years, however for the bottom 10 percent. The economic crisis has hit the poor again at a time when they have yet to fully recover from the previous crisis.
Koreas economic outlook this year is grim, with the government predicting growth of negative two percent, the Korean Development Institute minus 2.3 percent, and the International Monetary Fund a decline of four percent. The number of absolute poor earning less than subsistence level is feared to expand as full-fledged corporate restructuring has begun, companies are going under, and unemployment is worsening due to the slowdown in the real economy. Five to seven percent of the absolute poor are left out of basic government subsidies. The government must strengthen support for these vulnerable people.
In preventing the middle class from falling into poverty and to help the poor out of their plight, job creation is a prerequisite. To create jobs, the government has spent 4.9 trillion won (3.95 billion U.S. dollars) to promote job sharing and expand public works and youth internship programs. This is a stopgap measure and not a fundamental solution, however. Government policy must go beyond economic recovery by recovering and expanding the ranks of the middle class.
In addition, job creation should be led by the private sector. For this to happen, the government should induce companies to make a preemptive investment with floating funds worth 811 trillion won (650 billion dollars) and achieve deregulation for sustainable economic growth. Implementing proper measures to induce more corporate investment is the way to go for the government to both revive the economy and help the poor.