Posted January. 15, 2013 02:36,
At first, the restaurants sales were good thanks to a newbie businessmans marketing efforts, including posting flyers. Three months later, however, the number of customers plummeted and the owner lost his entire pension in two years.
After closing the restaurant, the owner was hired as a janitor of a building. I shed tears when I had to sell my home, which I`d bought after decades of hard work. It took decades for me to save a large sum of money, but I lost everything so fast, he said.
A major danger for the Korean middle class is that anyone can fall into poverty through just one failure. This is because of the lack of a sufficient social safety net, such as subsidies for the elderly. Early retirement has also grown more common in Korea since the 1997 foreign exchange crisis.
More than a few baby boomers who assume the most critical roles for their companies are barely classified as middle class with heavy debts and a future of economic uncertainty.
○ Middle class in appearance only
What bothers me the most is that people consider me a very well-off person just because I live in Seouls posh district of Gangnam and use a company-provided vehicle, but Im nowhere close to being well-off. But at the same time, telling everybody what Im going through wouldn`t be smart...
A 54-year-old executive at a mid-size company earns 6 million won (5,680 U.S. dollars) per month. He is categorized as a member of the high-income class based on Statistics Korea standards because his monthly salary is more than 150 percent of the middle-class average of 5.25 million won (5,000 dollars) in Korea.
Six years ago, he spent all of his savings and borrowed 500 million won (473,000 dollars) from a bank to buy an apartment for 800 million won (757,000 dollars). His home value went up in the first year after he bought it, and he said he was happy over his purchase. In 2008, however, the price began to fall and now, his home value is more than 100 million won (95,000 dollars) lower than the purchase price.
After paying 2.8 million won in monthly interest for the loan, he has insufficient funds to put his two children through college. He put up his home for sale two years ago, but no signs point to a sale. If I don`t get a contract extension at work this year, Ill be helpless. All I want now is to sell this home as fast as I can, move out of Seoul, rent a humble home, and lead a sustainable lifestyle, he said.
According to the total income and expenditure criteria of Korean households by Statistics Korea, 68 percent of domestic households belong to the middle-income bracket, and just 12 percent fall into the low-income bracket. In reality, however, more than a few categorized as the middle class are practically living as low-income earners and like the man above, many middle-income earners have reached their limits and are at risk of falling into the lower-income class at any moment.
The term house poor refers to those who cannot repay their mortgages even if they sell their homes due to falling housing prices. Such people struggle to make heavy interest payments while those who live in rental units barely make ends meet due to skyrocketing rent and private education costs for their children. Thus experts say the crisis facing Koreas middle class is much more serious than the figures say.
A Seoul resident, 48, working for a large construction company makes 70 million won (66,000 dollars) a year. When my children enter middle school, we need to rent a house in Gangnam. If we move there, we might seem like a middle class family in appearance. But in fact, our life will become much difficult to be called middle class because we`ll need a loan to pay the high key deposit to rent a home in Gangnam and the expensive private academic institutes for our children, he said.
○ Anxiety over the future
The erosion of the Korean middle class is reducing domestic demand, aggravating the country`s distribution structure. This is also putting a damper on the peoples morale by damaging confidence in their economic capabilities and making them nervous about the future.
Baby boomers are especially vulnerable to fears over the future. This generation has experienced economic crises over the past couple of decades. What shall I do if I lose my job tomorrow? How long can I enjoy the quality of life Ive had so far? These questions are indicative of many baby boomers who are suffering from anxiety. In watching this nervous group, younger Koreans have developed a negative view about the future.
Han In-hee, a sociology professor at Ewha Womans University in Seoul, said, The number of people who believed they are middle class drastically shrank in the wake of the 1997 foreign exchange crisis but climbed back up in the mid-2000s. But the number crashed again after the U.S.-led global financial crisis in 2008. In a fast-growth era, people dream of moving up from their current economic class. But in a low-growth era, the classes tend to be fixed and people experience frustration thinking they cannot get out of their economic class.
Most middle-class people are salaried employees who feel they are not benefiting despite Korea`s growing economy. One said, The countrys economy is growing. I pay my taxes well. But my living standard hardly improves! An elementary school teacher, 32, said, Each year, we hear about conglomerates reporting record operating profits or the government announcing an upgrade in the country`s sovereign credit rating. But Ive been struggling to pay the rise in the rental house deposit."
Other experts blame the frustration of the middle class on the intense competition and comparison practice of Korean society. Gwak Geum-ju, a psychology professor at Seoul National University, said, We live in an era in which consumption is boasted and TV dramas show only high-class society. In this environment, people think the lives of others are better than theirs," adding, "Like people in other countries, Koreans need to embrace new values like considering happiness from an individual perspective and focusing on mental values to create new standards for the middle class."