Korea‘s middle class face challenges amid widening income gap

[Graphics by Song Ji-yoon]

The middle class group in South Korea has expanded along with the country’s economic growth but the income gap between the middle and upper classes has widened to its highest level, an analysis showed on Tuesday.

According to an analysis by Maeil Business Newspaper of Statistics Korea’s income distribution and social survey data, the average gross monthly income of households classified as middle class, representing the third group in a five-tier classification, was 4.49 million won ($3,289.4) in 2022.

In contrast, the income of households in the top tier was 13 million won. The income gap between the fifth and third tiers stood at 8.51 million won, the highest since related statistics began to be compiled in 2011.

The gap between the fifth and fourth tier groups was also the largest at 6.24 million won.

The gap is likely to have widened further, as the monthly wage gap between regular and non-regular workers peaked at 2.4 million won last year, while the wage gap between companies with 300 or more regular workers and those with fewer than 300 reached a high of 2.88 million won.

“As the labor market and industrial structure become more polarized, income inequality among wage earners is also widening,” said Lee Pil-sang, former president of Korea University.

The share of the middle class with a median income between 50 and 150 percent increased to 62.8 percent in 2022 from 54.9 percent in 2011. During this period, the middle-class population grew by 17 percent to 32.19 million from 27.51 million.

Despite the apparent growth of the middle class, the income barriers separating it from the upper class have become more pronounced.

The median income based on disposable income rose 66.4 percent to 2.88 million won in 2022 from 1.73 million won in 2011, outpacing the 17 percent increase in the middle-class population during the same period.

Public sentiment reflects this growing income disparity.

Last year, 54.0 percent of citizens believed it was difficult for the young generation to move up the social ladder, compared to just 29.8 percent in 2009 when the Statistics Korea survey began. Only 29.1 percent of citizens believed social mobility between classes is possible.

In response to these trends, there is a growing consensus that various tax reforms are necessary to support middle-class asset formation and restore social mobility.

Kim Myung-joon, former head of the National Tax Service (NTS) Seoul Regional Office, advocated for revising the tax system to impose appropriate tax burdens on high-net-worth individuals while reducing taxes for those below the middle class.

Kim also added the need to expand wage incentives for lower-income individuals willing to work, in order to broaden the income base.