Social class and income inequality in Korea

Abstract

Compared with other East Asian countries such as Taiwan and Singapore, as well as other developing countries, South Korea is considered to have the lowest level of economic inequality. While there is still controversy over the relationship between the degree of income inequality and economic growth, which was a question raised in other East Asian countries, the low level of economic in equality in Korea is regarded as the key factor to Korea’s economic success (UNDP 1996, 52-53). Korea has been cited as an exemplary case for economic growth with relatively equal distribution. However, social inequality in contemporary Korea remains the most understudied issue in Korean academia in the 1990s. While most Koreans believe themselves to be sensitive to social contradictions or inequality and also for having a strong sense of egalitarianism, there have been few empirical studies of social inequality in Korea in either Korean or Western social sciences. Some empirical research on income inequality in Korea has reported the Gini coefficients that have indicated the degree of income inequality in its gross term. The financial crisis that began in late 1997 significantly transformed the structure of income distribution as well as the production system, altering employment structures, job opportunities, and economic compensation mechanisms. While the immediate consequence of the financial crisis resulted in massive unemployment with more than a recorded one million unemployed in 1998 and a rapid rise of irregular workers, the long-term effect of the crisis was a worsening of economic inequality and a polarization of income and asset ownership. In addition, the government, faced with the aggressive demands of the IMF, adapted a high interest rate policy, which contributed to the unexpected increase of wealth for the rich and consequently widened the gap between the poor and the rich. The long-term consequence of the economic crisis was a social crisis as well by increasing inequality and the number of the working poor. While South Korea was appraised as a successful case for its fast recovery from the economic crisis, its disruptive social impact could not be immediately nullified by the fast economic recovery. In this chapter, I will address the issue of class inequality, exploring the extent to which class inequality exists and how class inequality is associated with education and gender in South Korea. An empirical analysis of income determination provides an understanding of income inequality generated by social classes, proving that social classes play a most significant role in shaping economic life in contemporary Korean society. © 2013 Hee-Yeon Cho, Lawrence Surendra, and Hyo-Je Cho.