Income gap at its widest point since 1999 financial crisis

Posted on : 2008-02-15 11:06 KST Modified on : 2019-10-19 20:29 KST
Incumbent president’s term produces period of widest wage gap

The income disparity between the upper 20 percent of workers in South Korean cities and the bottom 20 percent was the widest last year since 1997, when the Asian financial crisis ravaged the nation’s economy, recent government statistics showed.

Last year, the annual income of the upper 20 percent of the population was 5.44 times higher than that of the bottom 20 percent, compared with the ratio of 5.38 from a year earlier, the National Statistical Office said in a report. The 2007 ratio represented the widest gap since 1999, when the ratio stood at 5.49.

The wage gap was the widest over the past five years, the duration of outgoing President Roh Moo-hyun’s term in office. Last year, the annual salary of the upper 20 percent of the population was 5.27 times higher than that of the bottom 20 percent, compared with 4.72 in 2002. For the same period, the current income ratio had risen to 5.2 from 4.82. That means the wage and income gap between the upper 20 percent and the bottom 20 percent had widened by 11.7 percent and 7.9 percent each during the five-year period.

As the gap between rich and poor is expected to increase, the statistics typified a phenomenon that South Korea is facing: the co-existence of rich households with more income than those in a developed economy and poor households with income equivalent to those in an underdeveloped economy. Last year, the average monthly income of the bottom 20 percent households was 1,329,307 won (US$1,407). Given the average number of family members, 2.87, and a won-dollar exchange rate of 929.20, the annual per-capita income of the bottom 20 percent of the population was calculated at $5,982. In contrast, the average monthly income of the upper 20 percent of households was 7,234,415 won. With 3.64 family members, the annual per-capita income of the upper 20 percent was $25,667. According to worldwide income statistics for 2006, released by the World Bank, the standard of living of the bottom 20 percent of the population is similar to that of people living in Gabon and El Salvador, while the standard of living of the upper 20 percent is similar to that of people living in Australia and New Zealand.

Despite the widening income gap, there were no signs of a decline in the burden of consumption on low-income households. For instance, the bottom 20 percent of the population used 7.3 percent of their total expenditures to pay for mobile phone and high-speed Internet bills, compared with the 3.6 percent spent by the upper 20 percent.

Song Tae-jeong, a researcher at the LG Economic Research Institute, said, “The income gap was wider last year than in 2006, in spite of a higher salary growth rate. This shows that some regular workers benefited from the wage hike. It’s more problematic that the structure couldn’t be fixed because of a sharp rise in asset values.”

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