Policy failures should not be repeated
The gap between the rich and poor deepened over the past four years under the Moon Jae-in administration. The average annual income of the richest 10 percent increased by 14.29 million won ($12,000) from 2016 to 2020, according to the office of Rep. Choo Kyung-ho of the main opposition People Power Party on Tuesday.
In contrast, the average income of the poorest 10 percent rose by only 170,000 won during the corresponding period. This means the annual income of the top 10 percent, which was 68.6 times that of the poorest 10 percent in 2016, rose to 69.8 times in 2020. The wealth disparity between the rich and poor steadily narrowed from 2016 to 2019. Yet it began to widen from 2020, apparently affected by the COVID-19 pandemic.
The economic inequality trend was even apparent in the top 0.1 percent. The combined annual income of the richest 0.1 percent ― 24,581 people ― amounted to 40.85 trillion won in 2020, equivalent to 1.62 billion won per person on average, up by 371 million won per person from 2016. This means the income of the top 0.1 percent was 848.4 times that of the bottom 10 percent in 2020.
Rep. Choo explained that the widening income inequality has mainly been due to the fallout from the devastating COVID-19 pandemic. The disparity has actually deepened, according to World Inequality Report 2022, which showed Korea's richest 10 percent possessing 58.5 percent of the country's entire wealth in 2021, an increase of 0.1 percentage point from the previous year.
The nation's economy grew 4 percent last year, exceeding its pre-COVID-19 level. Despite such a robust recovery, the gap between the haves and the have nots widened further. The prolonged COVID-19 pandemic has dealt a severe blow to small business owners and the self-employed.
The widening wealth gap has also been ascribed to the ill-conceived economic policies of the Moon administration. The so-called "income-led growth" policy resulted in the collapse of many small businesses affected by, for instance, a drastic increase in minimum wages. Failed housing market policies caused real estate prices to soar with household debt hitting an all-time high. Amid a lingering employment crunch, incomes of less privileged people continued to decline while the wage gap between large and small businesses widened further.
The bipolarization of wealth due to the coronavirus pandemic has been a global phenomenon. Policies should first be focused on helping those who are most vulnerable to COVID-19. Measures should also be taken to strengthen the social safety net and ensure a more equal distribution of wealth to prevent social conflicts from worsening. Major presidential candidates should embark on a full-fledged debate on how to narrow the income inequality and lay the groundwork to push for policies based on public consensus in the forthcoming government.