As with many other East Asian countries, South Korea has experienced rapid growth in income inequality since the early 1990s. Though a remarkable increase in income inequality took place after the financial crisis in December 1997, the declining trend of inequality showed that a reversing U-shape turn had already started in the early 1990s in South Korea.
Income Inequality in Korea provides a comprehensive analysis of households' income inequality over several decades, reporting trends and analyzing factors of the rising inequality in South Korea. As Amartya Sen argues, it is really difficult to measure economic inequality because of the ambiguity of the notion of inequality.Footnote 4 Above all, economic inequality is a much more complex issue than we might think because of various forms and diverse sources of income. The book focuses on household income, not individuals' income, derived from various income sources, such as labor income and transfer income.
It also attempts to give a systematic diagnosis of the trend of the rising inequality, analyzing various available data. It presents interesting findings to understand the dynamics of growing inequality with respect to macroeconomic changes and limited roles of public institutions, such as the tax system and welfare programs. Unlike labor economists, who focus on income from the labor market, the authors also address the impact of aging on economic inequality. They are successful in widening research on inequality by incorporating social and institutional factors in explaining inequality and poverty.
Income Inequality in Korea reports some findings that defy a myth of the Korean economic growth as an exceptional case of combining rapid economic growth and relatively equal distribution. First, it argues that many studies of economic inequality understated the degree of income inequality in South Korea because the poor population groups, including single households and elderly households, were completely excluded in the past research. Second, it also reports that the impact of education on economic inequality has changed over time. While education played a positive role in reducing economic inequality before the financial crisis in 1997, it tended to exacerbate economic inequality after it. With an interaction of education and age, older, less educated adults are likely to experience the most poverty. Third, it reveals that the welfare system for the poor in South Korea has failed to provide a safety net for them. While welfare programs were introduced right after the financial crisis, they have not properly functioned as a safety net for those who were unemployed and retired. The low coverage and the low level of benefits have failed to halt the deterioration of income redistribution and the increase of poverty. Fourth, the tax system is ineffective in reducing income inequality. The change in the Gini coefficient before and after tax is minimal, and the lowest among the OECD countries. In addition, the current income tax system has loopholes for the self-employed, who comprise almost one-third of the labor force, the largest proportion among the OECD countries.
The book provides well-documented long-term trends of income inequality and causes of economic inequality and poverty. Applying econometric methods, it contributes to the enhancement of our understanding of the trends of economic inequality and poverty in South Korea. Combining macroeconomic changes with social and institutional factors, it succeeds in identifying both structural and dynamic factors that shape household income inequality. While it succeeds in articulating an understanding of the trend and causes of income inequality, it does not pay enough attention to important social factors that shape household income inequality in South Korea.
First, the changing family system directly affects household income distribution. Both marriage and divorce have changed redistribution of household income. The strong homogamy, marriage between men and women with similar social backgrounds, tends to reinforce economic inequality, as more married women with higher education tend to work. In contrast, the rapidly increasing divorce rate, which tripled between 1990 and 2000, has contributed to the rise of female-headed households, mostly stricken by poverty. Thus, single-mother households represent a new type of poverty, worsening income inequality.
Second, the widening economic cleavage between big companies on the one hand and small and medium-sized companies on the other becomes the most important source of polarization of income of the companies' employees. Now several major chaebols, family-owned conglomerates, in South Korea dominate the whole economy, with an ever-increasing concentration of capital and profits. While those chaebols have been enjoying high profits from massive exports, due to the long-term economic recession, most small and medium-sized firms have been struggling to survive in the domestic market. The divergence of economic performance between the small number of chaebols and the majority of small and medium-sized firms has directly led to the polarization of workers in terms of wages and working conditions.
Third, the increasing gender inequality is not adequately addressed in the discussion of income inequality. While more women tend to be gainfully employed, the wage gap between men and women was not significantly reduced in the 2000s. If we control the effect of skill and knowledge on wage, the disadvantage of women in the labor market becomes even larger. Although recently more women than men receive higher education, women have experienced greater difficulties in getting hired and promoted than their male counterparts. While the book focuses on household income inequality, gender inequality should be incorporated into the discussion of income inequality at the individual level and the household level.
Economic inequality in South Korea has been significantly transformed over the last two decades. Rapid social change and economic transformation interacted to generate new types of poverty and an unprecedented level of income inequality in the 2000s. To understand the changing face of inequality, we need to be more open to multidisciplinary approaches than ever before because income inequality is a product of complex interactions among economic actors, social institutions, and policies. This book paves the way to addressing income inequality from the perspective of a variety of social sciences, overcoming departmentalized disciplinary boundaries. I would simply add some more steps to interrogate income inequality more thoroughly in contemporary South Korea.
