Income disparity in Korea is even more pronounced if measured in terms of disposable income, according to Prof. Kim Nak-nyeon of Dongkuk University.
Kim used National Tax Service data to estimate Korea's Gini coefficient, which is a measure of income distribution. Gini coefficient of 1 indicates that all income has been pooled in one group, while 0 signals perfectly equal distribution. For disposable income, the coefficient stood at 0.371, according to Kim, even higher than the government's official figure of 0.308.
That puts Korea in fifth place among OECD member nations with the worst income distribution, behind Chile, Mexico, Turkey and the U.S., and far higher than the OECD average of 0.314.
Kim's calculation directly counters the government's official position that income equality in Korea is about average among OECD member nations. He noted that Statistics Korea excluded high wage earners from its study since they tend to be reluctant to reveal their incomes, which resulted in the income disparity looking less serious that it actually is.
The majority of the public are fully aware that the gap between rich and poor is getting bigger all the time. Many Koreans eke out a living on less than W1 million (US$1=W1,085) a month, while on the other side of the spectrum there has been an increase in the number of high-income earners who pull in nine-figure or higher annual salaries.
Ordinary Koreans are simply dumbfounded when they learn about the astronomical bonuses awarded to executives of some major conglomerates. If the government keeps turning a blind eye to the income disparity problem, social tension will inevitably grow and economic growth will become difficult to achieve. The nation's human resource pool will be severely weakened if the poor are unable to pay for proper education and training for their children.
To narrow the gap between rich and poor, Korea needs to strengthen the social safety net for the poor. Compared to the advanced countries, Korean welfare policies have been unsuccessful in redistributing wealth. The government must set up a welfare system which makes the most of the limited resources available to help the poor.
The abysmal productivity of the service sector, which has been cited as one of the reasons behind income disparity, must urgently improve. Productivity in Korea's manufacturing industry is on a par with advanced countries', but in the service industry it is only about 60 percent of theirs.
As under-skilled workers flock to traditional service areas like wholesale and retail, restaurants and accommodation, 25.9 percent of workers in the sector make less than two-thirds of the median income. That is the highest percentage in the OECD.
The new government must do more than simply boost welfare spending to address the income inequality. It must take a broader approach, for example by improving productivity in the service industry and in small and mid-sized businesses and by reforming the education system. The aim must be for all Koreans to benefit from economic growth.