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By Lee Yeon-woo
Income inequality in Korea is likely to accelerate due to a rapidly aging population, according to a report released by the Bank of Korea (BOK) on Wednesday.
The report revealed that income inequality among households has worsened by 30 percent over the past 25 years, largely as a result of the aging population.
"The aging population is expected to have a significant negative impact on the Korean economy, not only by lowering labor productivity and increasing the burden of care, but also by widening economical inequality," the report noted.
Income inequality among those aged over 60 is found to be significantly higher than other age groups. This is because holding assets tend to play a crucial role among individuals over 60, as they see a drastic decrease in earned income after retirement.
Korea became an aging society in 2000 when the population aged 65 and over exceeded 7 percent of the total population. The aging trend has accelerated since then, and it is expected that by 2025 one out of five people in the country will be 65 or older.
"If the proportion of this age group (those aged over 60) increases drastically, income inequity across the entire economy is likely to intensify further," the report said.
For this reason, the report urged policy efforts to reduce the income gap among the elderly.
"Institutional support is necessary to facilitate reemployment opportunities for the elderly, as income inequality is attributed primarily to decreases in earned or business income after retirement," the report emphasized.
"If the working-age population ― those aged between 15 and 64 ― continues to decrease drastically, it will be inevitable to increase the labor force participation of the elderly. Consequently, a reorganization of the labor market, such as wage adjustment and introduction of more flexible working hours, should be considered," the report added.