The Bank of Korea said on the 11th that among first-quintile households with the lowest net worth and income, the share of young adults in their 20s and 30s rose to 15.2% last year from 7.9% in 2020. It means the asset-building ladder that allowed young people to buy an apartment by saving their salaries is disappearing. They are facing "complex polarization," with widening gaps in asset and income.
In "The state and ripple effects of household polarization in our economy," released the same day, the Bank of Korea said, "Rising real estate prices have widened asset gaps by real estate holdings, region, and generation among households." It said asset polarization has occurred because dwelling ownership is concentrated among older generations. The Bank of Korea said, "For young adults with a weak asset base, mobility into the upper class is diminishing even if they generate middle-upper or higher income."
There are signs income inequality will deepen. This is because the income gap between semiconductors and other IT fields and the rest of industry is expected to widen. If AI advances to the point of replacing simple labor, income polarization could become serious.
The income Gini coefficient fell from 0.353 in 2016 to 0.323 in 2023. But it began to rebound to 0.325 in 2024. The income Gini coefficient indicates inequality in income distribution, with values closer to 0 considered more equal.
As inequality grows like this, the efficiency of resource allocation declines. When the top 10% asset share rises by 1 percentage point, total factor productivity falls by 0.16%. High-income, high-asset groups tend not to further increase consumption even when income grows. In Korea, the top 10% net worth share expanded to 46.1% last year from 43% in 2022.
The Bank of Korea said, "There are limits to redistribution policies focused on income support," and added, "A new policy response that encompasses both assets and income is needed."