GINI Country Report: Growing Inequalities and their Impacts in Korea

There has been a great U-turn in inequality trends over the last 3 decades in Korea, the mid-1990s being a turning period when the downward trend of inequality changed upward. This is related to the great economic, social, and political changes which happened in the mid-1990s such as the re-establishment of diplomatic ties with China in 1992, joining the OECD in 1996, and the financial crisis and the change of political power in 1997. Since mid-1990s, the Korean economy has been fully opened to world economy, and the manufacturing sector continued to grow due to expanding export. Its employment share, however, drastically decreased resulting in jobless growth and labour market dualization. Going through the financial crisis calling for economic restructuring, not only potential economic growth rate, but also population growth rate and fertility rate have decreased, which deteriorate performance of labour market. Moreover, employment was the most hard-hit by the financial crisis. While the economy recovered its previous level very rapidly, the employment could not. Though the self-employed sector started to be dismantled rapidly and the ratio of wage workers has increased, however, the labour’s share in national account has decreased or stagnated since 1996. This may be due to the deterioration of jobs such as increases of non-regular and low-wage workers. The low-performance of labour market both in quantity and quality has been the main driver of growing inequality in Korea.