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S. Korea’s income inequality among top in Asia: IMF report

March 17, 2016

SEOUL (Yonhap) — South Korea’s top 10 percent of income earners account for 45 percent of total earnings, the highest level among 22 countries in Asia measured by the International Monetary Fund (IMF), according to a March report seen on the institution’s website on Wednesday.

Income equality, as measured by the net Gini coefficient, rose in 15 of the 22 countries from 1990 to 2013, the report said, with sharp increases witnessed in countries with large populations such as China, India and Indonesia.

For South Korea, the Gini coefficient dropped from 32 in 1990 to 31 in 2013, suggesting a small decrease in inequality over the cited years, but this contrasts with the large increase in the income share of the top 10 percent, which rose 16 percentage points.

“This development has been attributed to rapid aging, large wage gaps for regular and non-regular workers and gender occupational inequality,” the report “Sharing the Growth Dividend: Analysis of Inequality in Asia” said.

As with global trends, income share of the top decile also rose, driving such disparity. In 2013, the top 1 percent in emerging Asia earned 32 percent of the income share, compared to 30 percent in 1990. The share for the top decile in South Korea rose 5 percentage points over the measured period, the largest among the countries studied, to mark 12 percent in 2013. This ranked the country second after Singapore’s 14 percent.

For South Korea and Japan, the report named labor market imperfections as one of the likely causes of inequality.

“For Korea and Japan, the duality between regular and non-regular employment has been a key driver of inequality, with non-regular employment constituting around one-third of the labor force (as of 2013),” it said. “While duality can keep unemployment low, non-regular workers typically earn less, and receive fewer training opportunities and lower social insurance coverage, which contributes to higher wage inequality and lower social mobility.”

The report recommended that tax and expenditure policies be carefully designed to meet distributional objectives.

“Expanding and broadening the coverage of social spending is critical for more effective redistribution,” it said. “This includes improving low-income families’ access to higher education and adequate health services as well as a better targeting of social benefits, which can also finance an expansion of their coverage.”