Closing the income gapVarious data are flashing alarm signs about the severity of economic polarization in our society. According to a National Tax Service study on consolidated income taxes, the annual per capita income of the top 20-percent tax bracket surged to 90 million won ($83,032) in 2009 from 58 million in 1999.
That in the lowest 20-percent bracket, in contrast, fell from 3.06 million won to 1.99 million won during the same period, who are mostly self-employed. The income gap is also conspicuous among salary-earners. For the earned income tax data in 2009, the highest 20-percent earners accounted for 41.6 percent of available wages, while the lowest 20 percent accounted for 8 percent.
Even as operating profits of listed companies neared 100 trillion won last year, labor’s share of income fell below 60 percent for the first time, suggesting less earning power for employees. The national per capita income of $20,000 loses meaning when considering the upward spiral in the Engel curve (the lower the family income, the higher percentage spent on food) among low-income families.
The country’s economic polarization over the last decade has been most severe among the members of the Organization of Economic Cooperation and Development. After two financial crises, the top 20-percent is ready to accumulate 80 percent of the country’s wealth.
The government regrets that the fruits of growth have fallen mostly on large companies, but it is largely to blame for the outcome. Its stubbornly weak currency and low interest rate policy to support the economy benefited mostly large exporters. Sky-high consumer prices aggravate hardships for low-income families.
Quality of growth is as important as the pace. The government should fix economic policy to balance growth and promote the sharing of wealth. It should radically shift toward constructive welfare to provide more equal opportunities. The good news is that the Gini coefficient - a measure of inequality in income distribution - began to narrow last year thanks to various benefits for low-income earners.
There has been an increase in hiring since the second half of last year as the economy picked up speed, but growth must be maintained to ensure solid and sustainable wealth distribution. Authorities should scrap red tape in the service sector to boost jobs and revive self-employment. The government cannot do this work alone. It is a challenge that the government, companies and the public should tackle together.