Economic Crisis Worsening Wealth Disparity in Korea

The global financial crisis and the sluggish Korean economy drove the division between the haves and have nots to its widest point last year, and things are expected to worsen further this year.

The Korea National Statistical Office said yesterday that the Gini coefficient rose 0.001 point from the previous year’s 0.324 to 0.325 last year, the highest since the statistics agency began compiling data in 1990 based on incomes of urban households (excluding single-person and rural households).

The Gini index measures inequality of income distribution, with zero meaning perfect equality and one perfect inequality. The average of member countries of the Organization for Economic Cooperation and Development was 0.311 as of 2005.

If a country’s Gini index rises to 0.35 to 0.4, it is considered to have extreme income inequality.

Yoo Gyeong-joon, a senior researcher at the Korea Development Institute, said, “Generally, an economic slowdown widens wealth disparity,” adding, “The economic downturn has dealt a heavy blow to the working class, with temporary workers losing their jobs and the self-employed going bankrupt. This will further enlarge the wealth gap.”

Korea’s Gini coefficient had remained between 0.25 and 0.27 since 1990, but rose to 0.295 in 1998 and to 0.303 in 1999. After declining to 0.286 in 2000, the figure rose again to 0.301 in 2004, a year after the country suffered a credit card crisis.

It continued to grow every year until last year.

The widening income gap between the rich and poor is also reflected in the disparity ratio between the five income groups. The statistical agency said the income of the upper 20 percent was 6.2 times that of the bottom 20 percent last year, the largest gap since 1990. The ratio was 4.14 in 1990, 5.13 in 1999 and more than six in 2007.

Low-income households and the self-employed have been hit hardest by the economic downturn, while regular workers at large companies that have yet to undergo restructuring and high-income households remain unscathed. This has resulted in the growing wealth gap, according to economists.

An official at the Strategy and Finance Ministry said, “If the prices of properties and stocks purchased by the rich when the economy slows skyrocket, wealth inequality will further expand.”

“To prevent this from happening, the government will do its best to ward off a disproportionate rise in asset prices.”

peacechaos@donga.com