MZers more strapped as generational income gap widens

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MZers more strapped as generational income gap widens

People attend a job fair held at Jonggak Station Solar Garden in Jung District, central Seoul, on May 31. [YONHAP]

People attend a job fair held at Jonggak Station Solar Garden in Jung District, central Seoul, on May 31. [YONHAP]

Generation MZ is becoming more strapped as the income for MZers grew less than the income of older generations in recent years, held back by Korea’s plateauing economic growth.
 
The average monthly income of households with a householder under the age of 39 was 4.87 million won ($3,700) in the first quarter of this year, according to Statistics Korea’s quarterly household data released Thursday.
 
This was 1.37 times greater than the income earned by householders aged 60 and above — 3.55 million won — during the same period, the smallest difference since Statistics Korea began compiling data in 2006.
 
Householders under 39 earned 1.81 times more than heads of households above 60 back then.
 
The income gap between the two age groups narrowed, but the gap between householders under 39 and those in their 40s and 50s widened.
 
Those in their 40s earned 1.14 times more than those under 39 in the first quarter of 2006. Those in their 50s earned 1.07 times more than those under 39. By this year’s first quarter, they were each earning 1.37 and 1.27 times more than those under 39.
 
The older generations outpaced younger Koreans in terms of income growth rate. Heads of households aged under 39 were earning 15.1 percent more per month in the first quarter of this year than they did in the first quarter of 2019. Those in their 40s were earning 19.6 percent more, those in their 50s by 19.6 percent and those above 60 by 32.5 percent over the same period.
 
MZers have been spending less as a result. Their expenditure grew by 9.9 percent during the four years, and that of those in their 60s and above by 22.6 percent.
 
Experts point to multiple factors for the increasing discrepancy, including fewer high-paying jobs and difficulty building wealth.
 
The number of people working in the manufacturing sector — such as semiconductor and auto — that pay relatively higher salaries stood at 4.46 million in April. It was down 97,000 from the previous year and the fourth consecutive on-year monthly decrease.
 
A retirement savings product issued between 1976 and 1995 offered yearly interest rates of around 20 percent, which jumped to 40 percent in 1980 when a double-digit inflation was the norm.
 
Such relative poverty makes the MZers idolize cost-effectiveness, herding them to anonymous chatrooms to share how to make the best out of each penny.
 
MZers in 2018 earned 1.4 times more than those under 39 in 2000, according to a report on the age group released by the Bank of Korea in March. Meanwhile, Generation X earned 1.5 times more, and baby boomers 1.6 times more than they did in 2000.
 
Choi Young-jun, a senior economist at the central bank, said in the report that the total financial assets held by adults under 39 had barely changed from 2000 while their debt spiked 4.3 times, outpacing the rate the older generations saw, 2.4 times for Gen Xers and 1.8 times for baby boomers.
 
Korea was enjoying a double-digit economic growth before it halved during the 1997 currency crisis and halved once again in the 2008 global financial crisis, according to Choi.
 
"A drop in growth slashed quality jobs and income levels," Choi added. "Low-income levels characterize generations that undergo economic crisis. MZers tend to cut back their expenditure due to low income, which is a negative factor for domestic demand."
 
Koreans don't expect a rosy future under these circumstances. Of the 1,008 Koreans surveyed by the Pew Research Center last year, 60 percent of the respondents said they believe their children will be less wealthy in the future. In a similar survey by the research firm in 2013, 37 percent of the respondents had answered the same.
 
"The real problem comes from property," Jeong Se-eun, an economics professor at Chungnam National University, said. "If income growth fails to keep up with the rising property costs, young generations with no saved assets may have to spend all their income on rent."
 
The MZers "are not poorer than their parents in terms of GDP per capita, but their income level falls short of [their] expectations," said Lee Jong-hwa, an economics professor at Korea University and former president of the Korean Economic Association.
 
"Past 50 years have been an unprecedented period in history where real income has increased thirtyfold, but it may barely double in the coming 50 years," Lee added.
 
"Low income for the young generation leads to low marriage and birth rates, which further contribute to low economic growth."
 

BY JEONG JIN-HO, SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]
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