hankyoreh

When asked about his hopes for the New Year, “K” offered a response that’s much the same as most of us.

“I hope this pandemic will quickly end and our lives can go back to normal.”

K runs a small bar in Seoul’s Mapo District. Through the early phase of the COVID-19 pandemic, in spring of last year, K said he hadn’t felt much of a change.

But K’s revenue diminished by half during the second wave of the pandemic, in late August. Then it dropped still further, to 30%, when new restrictions forced him to close his doors at 9 pm in November.

Bars typically have the best business in December. But this year, it turned out to be the worst month of all. At best, a couple of tables were occupied. But on more and more days, not a single customer walked in.

“If no one comes in by 7:30 pm, I figure that business is over for the day,” K said. He used to close shop at 1 or 2 in the morning, but nowadays, he sometimes goes home at 8 pm.

While K’s customers may have gone away, his fixed costs haven’t. He has to stay on top of 2 million won (US$1,846) in monthly rent, and there’s only so much he can do to economize on ingredients and various bills. He ultimately let his two part-time workers go.

K still has money set aside to cover his deficit, but he notes that “several thousand dollars vanish in an instant.” He’s planning to take out a loan for small business owners that the government has promised to provide.

But will everything actually return to normal when the pandemic is over? “These days, people are having more food delivered and partying at home more often. I don’t think things will be the same as they used to be. I feel like COVID-19 will be a kind of turning point.”

While the disease brought by the novel coronavirus has been painful for many people, some have been more burdened than others.

When COVID-19 began spreading last spring, there was a flurry of projections and analyses about the “coronavirus era.” One depressing prediction that has come true is that COVID-19 would lead to more inequality.

That prediction was based on concerns that the pandemic would be crueler to low-income earners than high income earners, to irregular workers than permanent workers, and to women than men.

The fact that COVID-19 has been an “unequal disaster” is fully confirmed by the figures. In the third quarter of 2020, the income of the fifth quintile (top 20%) of income earners was 4.88 times higher than that of the first quintile (bottom 20%). That was a bigger gap than in the third quarter of 2019, when the fifth quintile’s income was 4.66 times higher than the first quintile’s.

Furthermore, many jobs have been lost in service sectors such as food and beverage and retail, as well as by temporary workers, day laborers, and the self-employed.

The boom in the asset market looks even more dramatic when compared with the stagnation in the real economy. In 2020, Korea posted its first negative growth rate in 22 years, since the 1997 Asian financial crisis, even while stock prices climbed to new heights.

House prices are rising at the fastest rate in 14 years. In effect, the low interest rates and high liquidity that have been implemented to prevent an economic recession have been driving up stock prices and real estate. When assets increase in value, the gap between those who own such assets and those who don’t grows even wider.

Meanwhile, the companies enjoying the biggest boom are those whose services don’t involve face-to-face contact, such as semiconductor makers and online shopping platforms.

Even worse, there’s a growing sense that this lopsided distribution of advantages and disadvantages will become further entrenched even after the COVID-19 pandemic. The structural changes to the economy imposed by the pandemic will give some people an opportunity to thrive while threatening other people’s livelihoods.

South Korean government officials insist that they did what they could to overcome the crisis, passing four supplementary budgets over the course of 2020. But the government has also been criticized for only loosening the purse strings under pressure from public opinion, after affected groups feel the pinch.

This is a time when the government’s role as distributor is particularly important. With the end of the pandemic still uncertain, bold preemptive fiscal expenditure will probably be the government’s most important responsibility for quite some time.

There may well need to be efforts to broaden the current policy horizon. One of the benefits that the coronavirus has brought Korean society, amidst the hardship, is that a wider range of economic and social measures have entered the forum of public debate.

Those measures include not only emergency disaster relief, which was actually dispensed to the entire public, but also universal basic income, universal basic assets, and a social solidarity tax. In the post-coronavirus world, such proposals should be discussed, and tested, more aggressively.

In June 2020, South Korean President Moon Jae-in observed a trend in Korean history, in which income equality gets worse in each crisis, including the Asian Financial Crisis of 1997 and the Global Financial Crisis of 2007-2008. Moon also promised to break the pattern of crises exacerbating inequality.

Actually breaking that pattern will require greater creativity and more inclusive policies.

Ahn Seon-hee

By Ahn Seon-hee, economic editor

Please direct comments or questions to [english@hani.co.kr]