A distribution disasterThe Moon Jae-in administration’s controversial economic policy based on so-called “income-led growth” is widening the income gap in South Korea. According to Statistics Korea’s data on household incomes, monthly average incomes for those in the top quintile were 5.23 times more than those in the bottom 20 percent in the second quarter of the year. The bigger the ratio, the more unequal the distribution. The country’s income distribution for the second quarter is at the worst level since the global financial meltdown hit South Korea in 2008. It is not an exaggeration to compare it to a disaster revisited after 10 years.
At the same time, while incomes for the top 20 percent increased by 10.9 percent over a year, those for the bottom quintile decreased by 7.6 percent. In particular, the lowest income bracket had to see their earned incomes dwindle by 16 percent, while their business incomes shrank by a whopping 21 percent. Those are the ramifications of the Moon administration’s relentless push for hikes in the minimum wage, as seen in this year’s 16.4 percent increase followed by another 10.9 percent hike next year.
The government’s push for drastic increases in the minimum wage caused a number of part-time jobs in the restaurant, lodging and retail services to disappear due to soaring personnel costs for employers. As a result, incomes of the self-employed also plunged except for a temporary 19 percent increase in their transfer incomes from government subsidies.
Prospects for the future are stark. In the past, about 300,000 people could find jobs each month, but that number was a mere 5,000 in July. In the meantime, jobs in the restaurant, lodging, wholesale and retail sector are increasingly difficult to find.
The Moon administration conducted a weird experiment with its income-led growth policy. Its flamboyant catchphrase was “justice in distribution.” In reality, it only worsened wealth distribution. An increasing number of small merchants and mom-and-pop shopkeepers cannot afford to pay the government-set minimum wage. The government tries to assuage them by announcing an additional 7 trillion won ($6.2 billion) aid package. That only fueled their anger.
Small merchants and the self-employed have threatened to stage a massive rally next Wednesday. Signs are everywhere pointing to the chaos triggered by the government’s income-led growth policy. When will it wake up and smell the stench?
JoongAng Ilbo, Aug. 24, Page 30