Korea Letter 06/15/99 -- middle class decline (fwd)

Illustrating the real effects of "neo-liberal" reforms in the wake of the 
"East Asian crisis," here's another report from the Korean press about the
decline of the middle class in that country.  

dave smith
sociology
uc-irvine


---------- Forwarded message ----------
Date: Tue, 15 Jun 1999 14:10:35 -0600
From: Evensen <executiv@xmission.com>
Reply-To: korea@lists.xmission.com
To: korea@lists.xmission.com
Subject: (korea) Korea Letter 06/15/99

KOREA LETTER
TUESDAY, JUNE 15, 1999

KOREA HERALD

SPECIAL ARTICLE

Korea's economic crisis leading to collapse of middle-income class

Only two years ago, Kim Dong-ki, a 37-year-old salaried man, considered
himself to belong to the middle-income class. With a decent annual salary,
he had no difficulty supporting his family of four and was able to set
aside money for the future.

Things, however, changed drastically when a serious economic crisis hit
Korea in late 1997. The economic turmoil forced Kim's company to make a
deep pay cuts and he has reconciled himself to a salary cut of more than 5
million won ($4,274) since then.

Now, Kim thinks he is no longer one of the so-called middle class and he is
not alone. Korea's financial crisis and subsequent economic restructuring
is putting the nation's middle class in danger of collapse as well as
widening the gap between the rich and poor, analysts say.

"In the wake of the economic crisis, fears over the collapse of the middle
class have been growing," said Park Hwon-koo, head of the Korea Labor
Research Institute (KLRI), at a recent symposium. "The prime reason, of
course, is rising unemployment and a drop in people's income." A look at
private and government statistics shows that the number of people in the
middle-income bracket has dwindled significantly in the past year.

According to a poll conducted by the Hyundai Economic Research Institute,
the portion of respondents considering themselves to belong to the middle
class fell to 34.8 percent in June last year from 53.1 percent a year
earlier.

An indicator of income inequality, the so-called Gini coefficient rose to
0.31 last year from 0.28 in 1997, which means that the income gap between
the rich and poor widened.

A survey of 1,200 Korean adults, conducted by the vernacular daily Hankook
Ilbo earlier this month, also shows that the number of people in the
middle-income bracket has decreased sharply over the past year.

According to the survey, only 46.3 percent of respondents think they belong
to the middle class, compared to the pre-crisis level of 70 percent.

In contrast, the portion of respondents who consider themselves to be in
the low-income bracket has more than doubled to 52.8 percent from 24.1
percent. A mere 1 percent of those surveyed, down from the pre-crisis level
of 5.9 percent, answered that they belong to the upper class.

In addition, 44.3 percent of those polled said their income has declined by
more than 30 percent, compared to January 1998 when Koreans began to feel
the impact of the economic crisis.

Nearly 92 percent of respondents replied that the income gap between haves
and have-nots is widening further, with the majority saying income
inequality has reached a serious level.

Government statistics also suggest that the numbers in the middle class has
fallen. According to a tally by the National Statistical Office, the number
of middle-class households has dropped to 45.8 percent from the pre-crisis
level of 52.3 percent.

The widening income gap manifests itself clearly in the capital city.
Thousands of homeless people, or street sleepers, live on Seoul's subway
stations and parks.

Striking a sharp contrast, Seoul's posh department stores are filled with
well-heeled shoppers almost everyday. And a recent series of public
subscriptions for posh apartments, which sell for over 300 million won
($256,400) has drawn a huge crowd of prospective buyers.

According to industry sources, high-priced consumer goods are selling like
hot cakes theses days as the economy shows signs of recovery.

Experts warn the shrinking middle class effect is having a negative
impact on Korean society and that, left unchecked, the problem will worsen.

One of the most serious problems stemming from the middle-class collapse is
a recent rise in children abandoned by their jobless parents.

Although the exact number of abandoned kids is unavailable, thousands of
children are presumed to have been put into institutions since the nation's
economic crisis.

"Due to a plunge in income, an increasing number of parents find it hard to
support their children," Chang Hye-kyung, an expert in women's studies,
said in a recent debate on "the middle-class crisis and family
disintegration." "The middle-class collapse could break up many families
whose bread-winners are unemployed."

Unless the government addresses the problem quickly, Park of KLRI said, it
will be impossible to overcome the economic crisis since the fall in the
number of people in the middle-income bracket might add to social
instability.

"The collapse of the middle class might delay the recovery of the
crisis-hit Korean economy by undercutting the foundation of domestic demand
since they are the major consumers of durable goods such as cars and
electronic appliances," he maintained.

>From the social point of view, the disintegration of the middle class, who
are the main buttress of "social cohesion," might make Korean society as a
whole more unstable, he said.

To deal with the issue, the government plans to come up with a package of
policy programs to aid the nation's middle class, including tax breaks and
increased fiscal spending.