The income gap between the rich and poor is widening in Korea with the global financial crisis hitting low-income households hardest. The average monthly salary of Korean households, with more than two family members, in the lowest 20 percent of the income bracket was W856,000 (US$1=W1,250) during the first quarter of the year, down 5.1 percent compared to the previous year. In contrast, the average monthly salary of households in the top 20 percent of the income bracket was W7.425 million, up 1.1 percent. As a result, the top quintile earned 8.68 times more than the bottom quintile in the first quarter. This is the largest wage gap seen since household income data was first compiled in 2000.
The main reason is the rise in job losses among low-income earners due to the economic slump. When faced with worsening business conditions, companies tend to lay off temporary workers first, rather than downsizing regular staff employees. This is why the number of temporary workers and day laborers who have been working for less than a year dropped 264,000 to 5.374 million in March from a year ago. Many self-employed people, such as owners of small restaurants, shops and lodging facilities, also lost their jobs.
During the 1997-98 Asian financial crisis, many of the laid-off workers were those who were forced to accept early retirement pay and leave jobs at large companies. These workers had money saved and received sizable severance payments and thus had the means to survive. However, the low-income temporary workers and small business owners losing their jobs this time do not have such safety blankets. They face immediate relegation into poverty and difficulty feeding themselves and their family members, which can lead to the loss of self-esteem, the break down of the family, and ultimately increasing homeless.
Each month, 10,000 new people sign up for government welfare checks because their wages fall below the minimum wage level (W1.33 million per household of four people). As of the end of April this year, 1.573 million people received government welfare checks, the highest number of recipients since the system was first introduced in 2000. This year, 143,000 people are using "food banks," which operate on food donations. This number is up 23 percent compared to 116,000 people last year.
The Korea Institute for Health and Social Affairs warns that if the country’s economy shrinks 2 percent this year as is projected by the government, 980,000 more people will fall into the so-called "working poor" class of society, who make less than the minimum wage. In 2007, there were 2.82 million working poor in Korea. This year, that number is expected to rise to 3.8 million.
If the number of poor people rises and income disparity worsens, social and political conflict and public discontent are likely to increase. Such sentiment could explode when triggered by a particular incident. The "rich" image of the Lee Myung-bak administration could make things worse. We may end up seeing more candlelight protests and tragedies like the deaths of evicted tenants in Yongsan.
So far this year, the government has announced 10 separate measures to aid low-income households, jobless people and cash-strapped, small business owners. But fiscal spending alone cannot resolve the problem of poverty. There are limits to what our social welfare programs can achieve considering the size of our economy. There are areas where the government needs to step up assistance, but the private sector also needs to pitch in. The haves of our society should reach out and make efforts to help the have-nots to share the burdens of society.