The purpose of this study is to identify the factors that determine income distribution in Korea from a macroeconomic perspective.
Although the dramatic growth of the Korean economy has benefitted people of all economic classes, the Korean income distribution structure still has a long way to go achieve relative fairness. Unlike other developing countries, income distribution in Korea is also under the influence of factors, such as education and work opportunities. While the disposal of government-confiscated properties, the aftereffects of the Korean War, the elimination of usury in rural areas, and the government confiscation of illegally acquired properties have all contributed to the redistribution of income in Korea, the current structure of income distribution is more a result of the land reforms and the reallocation of production factors. Economic development has also reinforced education-dependent income differences, while also enabling people of all classes to receive education and join the workforce. Once educated or trained, people begin to work for wages, helping to even out the income distribution structure somewhat.
However, the surpluses generated by the foreign capital that has been brought into Korea are no longer distributed fairly to workers on industrial sites. With high-interest loans locked, small-scale creditor assets, worth between KRW 50 million and KRW 100 million, have been redistributed in ways favorable to businesses. The soaring prices of real estate properties in urban and industrial towns and the increasing concentration of wealth in the already-wealthy continue to undermine the fairness and equity of income distribution in Korea.
Moreover, the widening income gap between cities and rural areas, especially pronounced since 1974, will distort the nationwide income distribution structure even further, causing the continued population influx into cities. The development of industries has birthed new classes of wealthy, while the income gap between urban workers and business owners/financiers continues to widen. The changing industrial structure has also contributed to the problem of urban poverty. As high economic growth continues to expand income inequality, Korean policymakers now need to acknowledge to these issues and take actions to address them.
Income inequality is also becoming increasingly apparent along the age line, with the elderly becoming increasingly more vulnerable on both economic and social fronts. Ideally, people should take good care of their aging parents, but doing so may not be feasible for every household. It is also impossible for Koreans to rely on their retirement pensions alone in their later years, unless they have worked as bureaucrats, career soldiers, teachers, or have held the same job for decades. The social security system needs to be established and consolidated as a matter of law. The Korean government also needs to provide more effective public assistance for the vulnerable groups of the elderly and the poor, while also encouraging the public at large to save wisely for their retirement.