Exit from low growth is key

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Exit from low growth is key

These days, poor Koreans have more difficulty escaping from poverty than before. Once they fall into the low-income bracket, it is tough to move up to the middle class.

According to a recent study made by the Korea Institute for Health and Social Affairs, a think tank under the Prime Minister’s Office that looked at changing income brackets from 2005 through 2012, the percentage of people who rose out of poverty was only 23.5 percent in 2011-12, down from 31.7 percent in 2005-6 - a whopping 8.2 percentage point drop in just seven years. Korea’s once-touted upward social mobility is swiftly losing steam today.

The trouble in breaking away from the stigma attached to the lower class not only exacerbates their frustration and pain, but also raises the possibility of their social discontent and fury at seeing their situation deteriorating, not to mention the huge increase in demand for welfare. The main culprit for the alarming decrease in people’s ability to exit poverty is no doubt low growth.

As the stagnant economy reduces jobs and income for the underprivileged class, the possibility for their rebounding decreases. As it turned out, the sharp decrease in our growth rates - from the 5 percent range in 2005 to just 2 percent in 2012 - coincides with the fall in the rate of exiting poverty. That is not a coincidence.

The most urgent task the government is facing is recovering Korea’s economic growth rate if it really wants to lift low-income groups into the middle class and above. Another important job for the administration is to make a drastic change in our economic growth paradigm from its heavy focus on the manufacturing sector to a refocus on the service sector, which can generate more job opportunities and income for the low-income bracket.

Welfare policies also must concentrate on so-called productive welfare so it can provide more practical job training programs to the needy and help them to make a living on their own. The old Korean saying - “even the state cannot keep the people from poverty” - does not make sense today since the state is responsible for helping people to end the vicious cycle of poverty in this modern age.

However, if the government continues to think of welfare only in terms of hand-outs and philanthropy, it will only consolidate the status quo of poverty. The government must reinvent its existing welfare policies toward the goal of creating productive welfare services that actually change people’s lives. And the first step in achieving that goal is putting an end to our country’s low economic growth rate.
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