Korea’s per capita income is expected to exceed $30,000 for the first time this year. That’s good news, but not all Koreans can welcome it with open arms.
Various data sets show that Korea’s gross national income for 2018 will surpass the mark. The International Monetary Fund estimated that Korea’s GNI in 2018 will reach $32,000 per capita, and local wire service Yonhap News Agency, citing data from the Bank of Korea and other financial institutions, predicted it will stand at $31,243.
It is hardly surprising that Korea has stepped on the threshold of the club of advanced economies. Korea’s GNI reached $29,745 last year and the figure stood at $23,433 for the first there quarters of this year. It is almost certain that the nation’s GNI will break the $30,000 milestone this year, 12 years after it exceeded the $20,000 mark in 2006.
As President Moon Jae-in said in an address earlier this month, it is a historic feat for Korea to become the seventh member of the “30-50 club” -- economies with per capita incomes of more than $30,000 and populations of over 50 million.
Indeed, we should be proud to be standing on a level with countries like the US, Japan, the UK, Germany, France, and Italy. In the same speech, Moon also noted that Korea’s exports are expected to hit a record-high $600 billion this year.
But the current economic situation should not allow Moon and the Korean general public to bask in only celebrations. In some sense, dark sides of the economy overwhelm the brighter aspects. Look at the youth joblessness problem, slump in small businesses and the ever-growing polarization.
Most of all, the Korean economy has been caught in a low growth trap. The Bank of Korea forecast that the Korean economy will grow 2.7 percent this year, the lowest level since 2012 when the gross domestic product grew 2.3 percent.
Even that low growth heavily relies on the stellar performances of some sectors, including semiconductors. Other major industries, including petrochemicals, machinery, construction, autos, steel and shipbuilding, are still struggling.
Besides, the low-interest era in recent years has failed to spur domestic demand and bolster corporate investment. Instead, it has only resulted in higher property prices and record-high household debt.
Polarization is another reason why joining the 30-50 club should not necessarily make us happy. The average household income of the lowest 20 percent of earners dropped 7 percent in the third quarter this year, whereas that of the top 20 percent was up 8.8 percent.
It is ironic that economic polarization is being exacerbated by the Moon government, whose “income-led growth” policy puts priority on increasing the incomes of the poor and narrowing the wealth gap.
The policy was highlighted by the rapid increase of the legal minimum wage and reduction of the workweek to 52 hours.
As it turned out, the measures are having more negative impacts than positive on the economy. The higher minimum wage wiped out the jobs of many contingent and temporary workers as small firms and self-employed businesses tried to meet the rise of labor costs by cutting their workforces.
Bearing the growing outcry in mind, Moon said in his address that he would do his best to help resolve the difficulties faced by businesses due to the rise of the minimum wage and reduction of the workweek.
But it is questionable if Moon will follow up on his promise. The resignation of Kim Kwang-doo, the vice chairman of the National Economic Advisory Council who had been a vocal critic of Moon’s minimum wage and workweek initiatives, strengthens suspicion that Moon will not make a major change to his income-led growth policy.
Kim, one of the architects of Moon’s economic platform during the presidential campaign, said last month that the Korean economy was being “shaken to the roots.” The exit of a man like Kim who can tell the president what’s wrong bodes for darker clouds on an economy that now has to set its sights on breaking the $40,000 per capita income mark.