The Korea Herald


[AtoZ into Korean Mind] Korea's broken ladder of social mobility

Frustrated by the lack of upward mobility through education and home ownership, young Koreans turn to stocks, cryptocurrencies

By Shin Ji-hye

Published : June 16, 2024 - 15:06

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Choi Kyung-min, 33, describes himself and his wife as having been born with a “dirt spoon” in their mouths, meaning they come from less privileged backgrounds.

Both graduated from university with student loans to pay back, and their parents are unprepared for retirement. Now renting a small apartment in Gyeonggi Province, they support their parents financially while trying to save as much as possible. However, it would take more than 10 years of saving to afford buying a home in Seoul of a similar size to their current one.

"When a couple has a baby, they have hope that their child will have a better life than their own. We don’t have such unrealistic expectations or hopes," he said.

Once born with a dirt spoon, the theory goes, there’s no escaping one's disadvantaged socioeconomic background, and it is highly likely that one will pass it on to one's child as well. This is why Choi and his wife have decided not to have children.

Choi is not alone in having this pessimistic worldview. According to a survey by the Korea Development Institute last year, only 30 percent of respondents believe their children will achieve a higher socioeconomic status than their own.

Shin Kwang-yeong, an emeritus professor of sociology at Chung-Ang University, sums it up: The once-popular phrase, “a dragon rises from a small stream,” is no longer valid in South Korean society.

“During South Korea’s rapid economic development, the prevailing mantra was that if a child -- even from a poor family -- studied hard, excelled academically and got into a good university, they could become a lawyer or doctor,” Shin said.

“But now, the first rung of the social ladder is broken because a child’s chances at entering top universities are largely determined by their parents' wealth."

Nearly half of the students who attend the three most prestigious universities in Korea -- nicknamed the SKY universities (Seoul National, Korea and Yonsei Universities) -- have parents belonging to the top 20 percent income bracket, according to data released by the office of Rep. Kim Hoi-jae from the main opposition Democratic Party of Korea.

As the race to enter elite universities starts earlier and competition becomes fiercer than ever, Korea's parents spend a record amount of money on private academies and tutoring for their children to get a head start. The total amount spent on the private education of school-age children stood at 27.1 trillion won ($19.5 billion) in 2023, the highest since data began being compiled in 2007.

Kim, 37, a finance professional in cross-border mergers and acquisitions, admitted his stable life is largely due to his parents. He spent about three years in the United States as a teenager while his father pursued a master’s degree in Boston.

When he returned, his parents hired an American tutor throughout his school years to maintain his English proficiency alongside expensive private tutors for Korea's college entrance exam. He graduated from one of the SKY universities and obtained an American Institute of Certified Public Accountants (AICPA) qualification in the US.

“When I was in my 20s, I believed all my achievements were due to my efforts. Indeed, I studied and worked hard,” Kim said. “However, as I got older and met more people, I realized that having parents with intelligence and wealth is not something everyone has.”

Even for those who manage to get into Korea's top universities, a hard-earned diploma doesn’t guarantee advancement in professional life, in the same ways it once did when it served as the most sturdy ladder for societal mobility here.

Park Da-jung, a graduate of a Seoul college with a degree in communications, has been hopping between several firms as an intern and fixed-term contract worker because she has failed to secure a regular position with permanent job security at a large firm.

“I worked hard to secure a GPA above 4.0, got a TOEIC score of 990 (out of a possible 990), and have earned multiple certificates related to my major, but I did not even pass the first screening round for entry-level positions at several large companies,” said Park, 27.

She has the bitter feeling that some of her friends with affluent parents seem to have easier lives. These friends get help from their parents when securing internships, which seems to lead to a permanent position more easily. They are even more attractive in both personality and appearance, Park claimed.

"Some of my 'gold spoon' friends went to the US to pursue master's degrees when they failed to get a job here. At least they seem to have more cards to play and options."

After graduation and successfully securing a job, the path upward remains broken for “dirt spoon” people, who face another hurdle in amassing wealth with only their salary.

As of April, the average price of a three-room apartment in Seoul is around 1 billion won, an amount an ordinary worker here earning the average monthly salary would have to save their entire income for 20 years to afford, based on data from Statistics Korea's Quality of Life Indicators in 2022.

Hong Ki-won, 35, said the only viable path to achieving a higher societal status in Korea is through property speculation. He can personally attest to that through his own investment in a presale apartment home five years ago.

Following his parents' advice, he maintained a housing subscription savings account for over 10 years, which grants prospective home buyers priority in the allocation of new apartment housing. His familiarity with the housing market stems from observing his parents' success in building wealth by buying real estate and relocating multiple times from Mokdong to Gangnam during the housing boom of the 2000s.

Thanks to this special savings account, he was able to secure an apartment unit in a large residential reconstruction project in Seoul. Two years after the purchase, the price of his home had more than doubled.

“The proceeds that I gained from buying that apartment exceed my lifetime earnings. This is how I witnessed the power of real estate to transform a person’s life," he said.

However, that "ladder" called owning an apartment has gotten too steep for younger generations to climb, as home prices have simply soared too high, and rules for getting a loan have become stricter as they are based on one's income.

In February, three new apartment units in Gaepo-dong, Gangnam-gu, became available for the lucky applicants who could afford one -- at nearly 1.3 billion won for a 59-square-meter unit. The amount was to be paid in installments: a down payment of 10 percent and the remaining 90 percent four months later, without being able to use the home itself as collateral.

This particular sale, which offered the homes at a significant discount from their current market value, attracted 1.01 million applicants, which is around one-ninth of Seoul’s entire population.

With this reality, these days, investing in stocks and cryptocurrencies have become possibly the only means of upward socioeconomic mobility left for many young people in Korea. Stories of individuals earning hundreds of millions of won through cryptocurrency investments abound, although many more stories tell of fortunes lost.

Seo Min-jung, who works for a marketing firm, lost tens of millions of won by investing in cryptocurrency in recent years.

"After I missed the chance to invest in the stock market when everyone else was making gains as stock prices skyrocketed after the pandemic, I didn't want to miss another opportunity. So I jumped into cryptocurrencies, but I didn't get good results," she said.

However, Seo still can't resist her desire to invest in cryptocurrency as stories continue to abound in online communities about people making a lot of money.

“When I was a child, I learned the importance of the value of labor. However, as I get older, it seems the value of labor is not so important anymore when I see people earning hundreds of millions through real estate, stocks and coin investments.”

When people feel unable to accumulate wealth and climb the social ladder through sound means, they seek alternatives, sociology professor Shin said. "It used to be the lottery in the past, but now it has shifted to stocks and cryptocurrencies."

"An open society is one where individuals can climb the social ladder through their own efforts, but that is not the case now," he said. "Even if you study hard or work hard, the ladder to move to a higher social class does not function properly, so many people seem to try to climb the social ladder in unhealthy ways."