It seems almost certain that South Korea will see its gross national income per capita surpass $30,000 for the first time next year.
The government’s economic policy directions for the coming year, unveiled Wednesday, forecast the country’s per capita GNI will reach $32,000 in 2018, up from an estimated $29,700 this year.
This prediction is based on the assumption that Asia’s fourth-largest economy will grow about 3 percent next year, with the won-dollar exchange rate continuing to hover slightly below 1,100 won.
Despite some downside risks facing the economy at home and abroad, such a premise may not necessarily be seen as too optimistic.
With per capita income above $30,000, an economy can be regarded as fully sophisticated, with advanced manufacturing technologies and a competitive service sector.
Korea has failed to achieve the landmark figure for more than a decade since its per capita GNI first exceeded $20,000 in 2006.
If Korea surpasses the threshold to enter the group of truly advanced economies, it would become the seventh nation with a population of more than 50 million that has per capita income over $30,000. The six countries that currently form the “30-50 club” are the US, Japan, UK, Germany, France and Italy.
It was with good reason that many South Koreans collectively raised an eyebrow at President Moon Jae-in’s description of the country as a “small nation” beside a giant neighbor in a lecture during his visit to China earlier this month.
Such humble rhetoric, which could be understood as intended to win the hearts of Chinese audiences, might well make him feel somewhat awkward when he likely celebrates the country’s achievement of the landmark income target that has eluded previous governments.
The prospect of per capita GNI above $30,000 is still overshadowed by mounting household debt, widening income inequality and rising elderly poverty and youth unemployment.
The average debt owed by households in the country increased 4.5 percent from a year earlier to a record-high 70.22 million won ($65,300) as of March, with their disposable income rising 2.4 percent to 41.18 million won on average over the cited period, according to a survey released last week by the Bank of Korea.
Given price hikes, the household income increase was almost negligible on real terms.
The top 20 percent of households earned income 7.06 times greater than the bottom 20 percent in March, an on-year increase of 0.05. Additionally, the proportion of people whose income is less than half the median income was 17.9 percent, with the figure for elderly persons aged 66 and above exceeding 45 percent.
According to data from Statistics Korea, youth unemployment reached 9.2 percent in November, the highest for the month in nearly two decades. The widening gap in wages between large and small companies and between permanent and temporary employees has aggravated the job mismatch among the country’s well-educated youths.
Increasing economic difficulties faced by working families and lower-income households seem to be reflected in a recent survey by a local research institute, in which just 37.8 percent of respondents believed Korea’s per capita income would surpass $30,000 within five years.
International comparison showed Korea lagging behind other advanced economies in improving the quality of life in tandem with overall income increases.
Korea saw its ranking in the Better Life Index, compiled by the Organization for Economic Cooperation and Development based on a survey of 38 major countries, slide from No. 27 in 2015 to No. 28 in 2016 and No. 29 this year, while its per capita income grew from $27,171 to nearly $30,000 over the cited period.
The Moon administration has said its income-led growth drive will be instrumental in enhancing the quality of life.
It will become clearer next year whether this approach, often referred to by Moon as a people-oriented growth policy, will bring intended results.
A string of pro-labor and anti-business measures taken since he took office in May could end up reducing job opportunities and making life harder for lower-income people.
It is certainly needed to take steps to increase household income. Data from the National Assembly Budget Office showed the household share of gross national income contracted from 72.1 percent in 1990 to 62 percent last year, with the corresponding figure for companies rising from 14 percent to 24.6 percent.
At the same time, however, structural reforms should be accelerated to overhaul the country’s economic and social systems in order to bolster its long-term growth potential and raise its per capita GNI far above $30,000.
Reaching the elusive target should also serve to galvanize discourse on how the country could move beyond the paradigms of industrialization and democratization, leaving protracted conflicts and maximizing our potential. Sophisticated and concrete plans are needed to revitalize the passion and endeavor of the Korean people by setting up goals and creating values that could bond them together.
This work would involve having an accurate grasp of global trends and exercising creativity instead of following in the footsteps of other advanced countries.
What is required of Koreans in the process of further advancing their nation may be to nurture responsible and sensible individualism not easily engulfed by selfishness and connections formed with a narrow scope of interests.
It will not help forge such mature individualism that nearly half of wage earners in the country are exempted from paying taxes, compared to the OECD average at 16 percent.
By Kim Kyung-ho
Kim Kyung-ho is the Sejong-based business editor of The Korea Herald. He can be reached at email@example.com -- Ed.