A recent report by the Organisation for Economic Co-operation and Development raises sobering questions about South Korea's economic achievement. In contrast to normally glowing assessments, the OECD warns bluntly that Korea is confronting 'a serious challenge', and cites the need to improve income equality 'in the context of a severe demographic transition' from one of the youngest populations in the OECD at present to the second oldest by 2050.
Clearly, for all the hype about Samsung, Hyundai and the other chaebol, not everyone is sharing in the Korean success story. In fact, says the OECD, rapid growth over the past decade was marked by a rise in income inequality, and social problems were exacerbated by the 2008 global financial crisis.
Problems besetting the Korean economy manifest themselves in any number of ways.
First, the chaebol, or family-owned conglomerates, are smothering small and medium-sized enterprises by killing would-be competitors and holding down the prices they pay SMEs for supplies and parts. Second, while Korean workers put in long hours, their productivity is well below that of most OECD countries. Increasingly, workers are hired only part-time, on day rates, for pay far below that of full-time employees.
Among the hardest hit are young college graduates. An astounding 82 per cent of high school students go on to college. Yet the employment rate among youth between 15 and 24 was 22.9 per cent in 2009. Most young people with college degrees have to settle for work for which a college education is really not needed. Many work only part-time - enough to count statistically as employed but not enough to support a family.
Korea's spending on social welfare also ranks well below the OECD average. As the income gap widens, taxes on the wealthy and on their companies remain far too low to finance social programmes that are needed in an ageing society.