The Korean government faced the fury of the middle class earlier this month when it introduced
a tax code proposal.
that was intended to squeeze more tax revenue out of regular-income earners.
It spurred a debate over who exactly falls into the nation's middle class,. and the fact
that there are less and less who qualify these days.
For more on the downward trend.
and what this means for the nation's economy,. we turn to Arirang's Hwang Ji-hye at the newscenter.
Ji-hye, let's first clarify the definition of "middle class."
Who are we referring to?
The OECD defines a nation's middle class as those whose income stands between 50 percent
and 150 percent of a country's median income.
Here in Korea,. that would apply to people with incomes between around 16-thousand and
50-thousand U.S. dollars.
But to many in Korea, the perception is that you're in the middle class if you have a house
without any mortgages,. earn enough money to feed and clothe yourself and your family,
educate your kids,. and still have a little something left over to sock away.
It's a point of reference.
in a country where there is a stark difference between the reality and the perception of
who belongs in the "middle class" bracket.
In a survey conducted by the Hyundai Research Institute on around one-thousand people,.
more than half of those who fell in the OECD's middle class bracket considered themselves
to be in a lower-income group.
The respondents of the survey said they consider the "middle class" to be households with a
monthly income of around 45-hundred dollars,. after taxes have been accounted for,. with
total assets of around 700-thousand dollars.
Those totals are inflated.
compared to the OECD's definition of the middle class, which states that homes with a monthly
income of 32-hundred dollars and total assets of around 220-thousand dollars qualify.
So, where does the wide gap come from?
Well, the perception is somewhat based on reality.
While income levels do meet the criteria for being in the middle class, they're having
to spend more.
While the average assets of Korea's middle class rose 13 percent between 2006 and 2012,.
soaring housing prises and educational expenses over that same period forced middle class
debt to rise 30 percent.
"The most important factor in why people don't consider themselves to be in the middle class
depends on a household's income and how much they're spending.
Households with more expenditures compared to income will not think of themselves as
being middle class."
And another "middle class" problem we're facing here in Korea. is that the number is shrinking.
Right, Ji-hye?
Exactly.
A large number of people have fallen out of the middle class since 1997 when the Asian
financial crisis hit the nation.
The ratio of the middle class defined by the OECD dropped to 67 percent in 2011,. down
more than 6 percentage points from 1997.
Since then, the gap between the nation's rich and the poor continued to widen, . making
it difficult for low-income households to rise into the middle class.
The nation's slumping growth over the past few years has also caused the gap to further
widen.
"The middle class is the backbone of a nation's economy.
When more households are included in the middle class, it means the nation's economy is developing
and stabilizing.
But a shrinking middle class means there are either more high-income or more low-income
households,. which indicates rising uncertainty about the nation's economy and society."
But I can't imagine that Korea is the only nation faced with the problem of a shrinking
middle class.
No.
The middle class is in decline in other major OECD economies as well.
The United States, Japan, France and the United Kingdom had their middle class ratio drop
in 2011 compared to 2007,. and the Samsung Economic Research Institute expects the downward
trend to continue.
due to slow growth in those countries.
Japan's middle class, meanwhile,. was standardized downward,. with many households falling into
the lower-middle class.
Germany, however,. was able to maintain a relatively stable ratio of the middle class.
thanks to government policies that boost permanent jobs and focus on vocational training.
Then what should Korea do to build up its middle class?
Experts say.
that the government should work on boosting the economy to create more quality jobs.
They add.
that it's also important to lessen the expenditure burdens on households by improving housing
and educational policies.
All right, thank you for that report Ji-hye.
That was our Hwang Ji-hye, reporting live on the shrinking middle class here in Korea.