Our neglected middle class

The middle class is generally referred as the backbone of an economy. Without a strong backbone, neither individuals nor the society as a whole can perform normally. The Korean middle class has diminished over the last two decades. Median-income households accounted for 75 percent of Korean families in 1990. That share shrank to 65 percent in 2013. The data is actually generous because the national statistical office compiled it against a middle-income guideline of 50 percent to 150 percent of the Organization of Economic Cooperation and Development. It is not likely, though, that 65 percent of the population feel they are middle class. There’s a big gap between the statistics and how people see themselves. In a Hyundai Economic Research Institute poll in June, just 46.4 percent considered themselves as a part of the middle class.

“Saving the middle class” has been a popular slogan for the government, politicians and corporations. But it remains just rhetoric because policies are, in fact, rarely focused on the middle-income group. Since social welfare dominated the political agenda from a few years back, the middle class fell entirely off the radar. To draw attention these days, one has to be rowdy. The voices of the mostly docile middle class are drowned out by street protesters and ignored by the wealthy.

As an example, let’s take the different approaches to controversial hikes in tobacco and automobile taxes. Many vehemently protest the hike in the tobacco consumption tax. Politicians have joined the chorus. They claim the government was taxing the small puff of relief enjoyed by the working class. The automobile tax was a different story. Taxing automobiles is lesser of an issue because owning a car puts an individual in a class that can afford to pay a little more tax. That is why we have very few arguments against the automobile tax.

In fact, taxes come down the hardest on the middle class, which has steady incomes. One out of three workers do not pay any income tax because they are “hard-up.” Of 15.77 million income earners, 5.16 million or 33 percent were pardoned from income tax last year. What about the richest group? Just 120,000 are subject to the maximum income tax rate of 38 percent. Also the rich get off easier with the tax office. The National Tax Service lost one of two lawsuits filed by rich taxpayers to reclaim taxes of more than 5 billion won ($4.79 million). But it won nine out of 10 cases with the middle-income earners of less than 100 million won.

The middle class is also excluded from many policy benefits. Interest rates are at their lowest level, yielding less than 1 percent a year. But tax-incentive financial products are available for the low- and high-income groups. Under the revised tax code, the mandatory number of years of contributions for tax-deducted nest-egg savings has been reduced to three from seven - aimed to support the working class as the savings are available for people earning less than 25 million won a year. The rich also received a gift. They were allowed to separate payment for their profit tax when they get their comprehensive tax bill. All these benefits came at the expense of the middle class. In general, the government has been too concerned with building a ladder for the lower income to climb, and they failed to see the middle group tumbling down into poverty.

Public housing policy is also focused on the low-income category. New measures or deregulations are on cheaper housing supplies for low-income groups. Redevelopment policies are for the upper-middle-class neighborhoods. The government’s deregulation in redevelopment, or renovation guidelines in expensive southern Seoul neighborhoods, is more or less designed to funnel middle-income wealth into the pockets of wealthy people. Price surges in housing supplies in redevelopment areas will only benefit wealthy homeowners because prices of homes in other parts of Seoul where most middle-income families live do not gain that much. Families living in rented apartments now have to borrow to keep roofs over their heads.

The middle class is the heart of our society. Yet all our policies are turning against them. It is a scary thought, but the middle class, too, can get angry.

JoongAng Ilbo, Sept. 25, Page 34

*The author is an editorial writer.

by Yi Jung-jae