Pandemic Deepens Income Disparity

The coronavirus pandemic has made living conditions for low-income households even worse as the bulk of jobs lost to lockdown are low-paying service-sector positions.

Many low-income families barely scrape by emergency handouts and temporary menial jobs artificially created by the state. But once the payments stop their prospects are dire since the economic recovery is expected to be slow and uneven.

According to Statistics Korea, the average monthly income of households in the bottom 20 percent of the wage bracket stands at W596,000 in the fourth quarter of last year, down W90,000 from a year earlier (US$1=W1,108). Over the same period, the income of households in the top 20 percent rose almost W130,000.

A total of 628,000 jobs disappeared by last December, and the bulk were low-paying positions. Temporary and day-labor jobs fell 349,000 on-year. In the service and retail sectors, almost 400,000 jobs were wiped out.

As a result the income quintile share ratio, which calculates income inequality as the ratio of the total income of the top and bottom 20 percent, grew alarmingly.

The money earned by the bottom 20 percent increased around W30,000 a month in the fourth quarter thanks to emergency aid. The government handed out between W1 million and W2 million to small business owners and another W500,000 to those who had to shut down their stores due to the pandemic. But excluding government handouts, gap between them grew from 6.89 times in 2019 to 7.82 last year.

One reason is that the aid was not focused on the truly needy. The income of households in the upper 20 to 40 percent in the fourth quarter grew by W98,200 or 33.6 percent on-year. But the income of the bottom 20 percent only grew by W79,200 because aid money went to the owners of stores that were shut and not to staff who were laid off.

"No amount of government aid money can resolve income disparity if there are no jobs," said Sung Tae-yoon at Yonsei University. "The tough job market we see now is the result of the minimum wage hike and shorter working week that the government implemented before the pandemic, so it will not be easy to solve those problems."