The level of income inequality in Korea is generally improving, with research indicating that the rate of easing inequality among lower-income groups is faster. This is attributed to the impact of minimum wage increases. However, it appears that income inequality among higher-income groups does not improve even with the rise in minimum wage.
Professor Han Jong-seok of Dongguk University presented a paper titled 'Income Inequality in Korea Over the Past 20 Years' at the World Economists Conference on the afternoon of the 21st. The paper was co-authored by Professor Han and other experts, including Chang Yong-seong, a member of the Bank of Korea's Monetary Policy Committee, and Lee Jeong-min, a professor of economics at Seoul National University.
This study was conducted as part of the international income dynamics analysis project 'GRID.' Currently, 13 countries, including the United States, the United Kingdom, and Sweden, are participating, but the participation rate from Asian countries has been low. However, this research has been evaluated as providing significant contributions to the analysis of income inequality in the Asian region.
The researchers analyzed income trends of workers aged 25 to 54 based on data from the National Health Insurance Service from 2002 to 2022. The analysis showed that the income decile ratio, a key indicator of inequality comparing the lowest 10% to the highest 10%, has notably decreased since 2002.
When divided by income brackets, the rate of improvement in inequality among the low-income group (lowest 10%) outpaces that of the high-income group (highest 90%). Professor Han noted, 'Inequality among the lower class has significantly decreased compared to the upper class,' adding that 'similar trends can be observed when examining different demographic groups, such as men and women.'
In particular, income inequality among the youth has improved rapidly. When analyzing age groups divided into 25 to 34, 35 to 44, and 45 to 54, income inequality among young people (25 to 34) consistently improved over the past 20 years. In contrast, inequality among middle-aged and older adults increased until 2010 before showing a downward trend.
The researchers further analyzed the impact of minimum wage and real gross domestic product (GDP) growth on reducing inequality. The findings indicated that a 1% increase in either the minimum wage or per capita real GDP leads to a reduction in overall income standard deviation.
However, the effects on upper and lower income groups varied. While the increase in minimum wage alleviated inequality among the lower income group, it did not affect the upper income group. In contrast, real GDP growth reduced inequality among the upper income group but did not improve inequality for the lower group.
Professor Han explained, 'Both the minimum wage and real GDP contributed to the reduction of income inequality, but the dynamics between the upper and lower income groups were generally different.' He noted, 'Real GDP only benefits the upper class, while the minimum wage only benefits the lower class.'