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Solution lies in keeping jobs under initiatives of private sector
South Korea's income distribution gap widened early this year because the COVID-19 pandemic hit the most vulnerable people hardest.
According to Statistics Korea, the top 20 percent of the income bracket earned 5.41 times higher than the bottom 20 percent in the first three months of the year, up from 5.18 times a year before. This means increased inequality in income distribution. The ratio fell in 2019 for the first time in four years but turned upward in the first quarter of 2020, unable to maintain its improving trend.
All this was because temporary workers and day laborers in the bottom 20 percent of the income ladder were crowded out of the job market in large numbers. Thanks to the government's emergency relief funds, those in the bottom 20 percent group managed to maintain their income level. Still, the gap with the top 20 percent bracket widened as the COVID-19 shock affected the latter relatively less. The deteriorating income inequality had been fully expected, given the mass unemployment that hit low-income earners. But the official statistics reaffirming this is still a disappointment.
Household expenditure, too, accurately reflected the pandemic's adverse effects. Disposable income of all families rose 5.1 percent. However, monthly household consumption stood at 2.87 million won ($2,330) per family, down 6 percent year-on-year ― the steepest drop since the government began to compile related data in 2003. It was due to Koreans' inability to go out and spend their earnings as they pleased as a result of strict social distancing rules. Poor people reduced their spending by 10 percent, far higher than the 3.3 percent consumption decline recorded by wealthier people.
The problem is that the income and wealth gap will likely increase further in the remaining quarters. To improve income distribution, the nation has no other choice but to save existing jobs and create new ones. It is imperative to flatten the pandemic's curve as early as possible. At the same time, the government should remember that it is the private sector that provides jobs, and bring out its entrepreneurship as far as possible through bold regulatory reform.
