Journal of Contemporary Asia

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Rising Inequality and Shifting Class Boundaries in

South Korea in the Neo-Liberal Era

Hagen Koo

To cite this article: Hagen Koo (2021) Rising Inequality and Shifting Class Boundaries
in South Korea in the Neo-Liberal Era, Journal of Contemporary Asia, 51:1, 1-19, DOI:
10.1080/00472336.2019.1663242

To link to this article: https://doi.org/10.1080/00472336.2019.1663242

Published online: 16 Sep 2019.

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JOURNAL OF CONTEMPORARY ASIA
2021, VOL. 51, NO. 1, 1–19
https://doi.org/10.1080/00472336.2019.1663242

Rising Inequality and Shifting Class Boundaries in South

Korea in the Neo-Liberal Era
Hagen Koo
Department of Sociology, University of Hawaii at Manoa, Honolulu, USA

ABSTRACT KEYWORDS
Having maintained a relatively equitable pattern of income dis- Income inequality; South
tribution throughout the period of rapid economic development, Korea; polarisation; class
South Korea has experienced a drastic increase of inequality over boundaries; affluent middle
class
the past two decades. This article examines Korea’s income dis-
tribution pattern and identifies several structural cleavages and
mechanisms in the economy that account for the rising inequality
and then considers various class structural implications of this
change in income distribution. It argues that Korea’s income dis-
tribution has become polarised, but that this polarisation is more
complex than usually captured by the popular phrase, “the top 1%
versus the bottom 99%.” It involves two forms of polarisation: one,
occurring in the labour market between regularly employed and
non-regularly employed workers, and between employees of large
firms and smaller firms; and the other, between a minority of top
income earners (the top 1% to 10%) and the rest of the labour
force. The consequences of this skewed income distribution
include a shrinking middle class, blurring class boundaries, internal
divisions within both the middle and the working class, and the
rise of a new, affluent middle class.

South Korea long enjoyed a moderate level of economic inequality and had ample room
for upward social mobility for people willing to work hard and make sacrifices for a
better future. Even during the period of rapid industrial expansion in the 1970s and
1980s, income inequality remained at a modest level, at least in comparison with other
countries. Thus, South Korea, along with the other Asian “little tigers” (Taiwan,
Singapore and Hong Kong), has been admired for having achieved what economists
like to call “growth with equity” or “shared prosperity.” In recent years, however, the
situation has almost completely reversed. South Korea is no longer a society of
moderate inequality. In fact, the level of income inequality is approaching that in the
USA, which is the highest among the OECD economies. Accelerating inequality has
thus become the most serious social problem in Korea today along with widespread job
insecurity, the two of which are closely related.
The purpose of this article is to examine the changing pattern of income inequality
in South Korea and consider its implications for class structure. Korea’s growing

CONTACT Hagen Koo hagenkoo@hawaii.edu Department of Sociology, University of Hawaii at Manoa,

Honolulu, HI 96822, USA.
© 2019 Journal of Contemporary Asia
2 H. KOO

inequality has received extensive analyses from economists and thus an adequate
amount of data is available by now, though mostly in Korean. My major objective in
this article is not necessarily to bring new data or any novel interpretations of these data
but to review the results of existing studies carefully and make them available for an
English-language audience. Another important objective is to examine Korea’s income
distribution pattern from a broader sociological perspective and explore the class
structural consequences of the changing pattern of income inequality. While there
exist plenty of expert analyses on Korea’s income distribution, few studies have
explored how this income inequality is related to a broader change in the class
structure.
During the past two decades, income distribution in Korea has shown a polarising trend of
two kinds: (i) polarisation in the labour market according to employment status, producing
large income differentials between regular (or standard) workers and non-regular (non-
standard) workers and between those employed at large firms and at small- to medium-
sized firms; and (ii) polarisation between a minority of top income earners and the rest of the
labour force (in the bottom 80–90% of the income hierarchy). This pattern of income
distribution has led to internal division within the working class and the blurring boundary
between the working class and the middle class. The middle class has also undergone
significant changes, shrinking in size and experiencing internal division between a minority
of its affluent members and the rest of the middle class. In general, class boundaries have
become increasingly blurred and complex while class inequality has become deeper and
hardened.

Income Distribution
South Korea’s income distribution pattern since 1990, measured by Gini coefficient, is
shown in Figure 1. It shows declining income inequality during the first half of the 1990s,
reflecting a continuation of the favourable income distribution of the 1980s. Earlier data are
not presented in the figure due to inconsistent measures of inequality in the different
periods. However, previous studies have indicated that South Korea experienced a sub-
stantial reduction of income inequality during the 1960s, with some increase during the
1970s and then a long period of declining inequality from the early 1980s to the early 1990s
(Cheon and Shin 2016; Kim 2012; Kwak and Lee 2007; Ryu 2012; Shin 2013). But income
distribution began to deteriorate from the mid-1990s, with the most dramatic increase
during the period of the Asian financial crisis (1997–1998), increasing from 0.259 in 1995 to
0.298 in 1999. It dropped for a couple of years but then continued to increase until it
reached 0.320 in 2009. It began to decline again from 2009 but increased again from 2016.
The acceleration of income inequality in the recent past is more evident if we
examine the other popular measure of income inequality, shares of decile income
groups. The ratio of income share for the upper 10% to that of the bottom 10% has
changed from 3.30 in 1990 to 3.75 in 2000, to 4.90 in 2010 and to 5.01 in 2016.
Korea’s Gini coefficient of 0.302 in 2013 (measured by household income distribution) was
slightly lower than the OECD average of 0.316, with Korea ranking 17th of the 34 OECD
member countries. But in terms of the Gini coefficient based on individual income, Korea
shows one of the highest rates of inequality (Cheon and Shin 2016). This discrepancy is due to
the fact that Korea has more income earners per household than other advanced economies.
 JOURNAL OF CONTEMPORARY ASIA 3

0.340

0.320

0.300

0.280

0.260

0.240

0.220

0.200
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total income Disposable income

Figure 1. Trend in Gini coefficients

Note: Income refers to household income divided by the number of household members (“equivalised household
income”), based on national surveys of urban households with two or more household members.
Source: Data are drawn from the Korean Statistical Information Service, various years.

Korea’s ratio of income for the top 10% to the bottom 10% was 4.78, very close to the USA’s
4.89, which is the highest among the OECD countries. These data indicate that South Korea
has experienced an accelerating trend of income inequality more abruptly than most other
advanced economies have done in recent years.
A consensus among analysts of Korean inequality is that the Asian financial crisis
marked a turning point in the country’s income distribution trend (Cheon 2016; Joo
2015; Kim 2012; Kim 2015b; Shin 2013). The great setback experienced by the economy
during this period and the extensive neo-liberal reform that followed are widely understood
as major causes of accelerating income inequality. But attributing the increasing inequality
entirely to the economic crisis may be unwarranted. After all, as the data in Figure 1
indicate, inequality began to increase from 1995, two years before the crisis. We must
consider other broad structural factors to account for this change such as the economy’s
transition to technology- and capital-intensive industries, economic liberalisation and
Korea’s increasing export dependence on the Chinese market. Also important are major
demographic shifts involving the rise of single families, an ageing population and a rising
4 H. KOO

divorce rate (Shin and Kong 2014). All these changes have intensified since the 1990s and
have affected income distribution in significant ways. Nonetheless, there seems no question
that the economic crisis played a crucial role in changing Korea’s income distribution. The
sharpest rise of income inequality occurred during the four-year period associated with the
crisis. The Gini coefficient of 0.266 in 1996 rose to 0.298 by 2000, increasing 12% in three
years. The ratio of the top 10% to the bottom 10% increased from 3.46 to 4.16 during the
same period, which clearly set the pattern for the continuous rise of inequality in the
succeeding period.
What distinguishes the post-1990s period from the earlier period is not just a higher
level but a more complex pattern of inequality. In order to understand this change
adequately, we need to examine two dimensions of growing inequality in the recent
period: one, inequality that has been boosted by sectoral divisions in the labour market
between regular workers and irregular workers and between employees of large firms
and those of smaller firms; and the other, inequality that has widened at the top of the
income hierarchy between a minority of top income earners and the rest of the
population. Most studies available on Korean inequality tend to focus on either of
these two processes, but in this article a more comprehensive picture of Korea’s income
distribution is provided by considering both a horizontal labour market mechanism and
a vertical mechanism of income divergence.

Labour Market Cleavages

One of the most important consequences of the economic crisis was the revision of
labour laws in 1998 that allowed firms to lay off redundant workers easily and to replace
regular workers with non-regular or non-standard workers. Korean capitalists had
attempted to change the labour laws previously, in 1995, but met huge labour resistance
and achieved only limited success. But thanks to the crisis environment and the strong
pressure exercised by the Kim Dae Jung government (1998–2002), the Tripartite
Committee (representing labour, business and government) was able to push neo-
liberal reform through. The immediate consequence of this labour law revision was a
sharp rise of layoffs and the replacement of regularly hired workers with temporary or
other contingent workers. Consequently, the number of non-regular workers increased
dramatically during the immediate post-crisis period. According to government labour
statistics, the proportion of irregular workers (including temporary workers and daily
workers) increased from 41.9% in 1995 to 52.1% in 2000. According to another
definition used by an independent labour research group, the ratio of irregular workers
soared from 43.2% of all paid employees in 1996 to 58.4% in 2000. The government
developed a standard definition of irregular workers in 2002 and began to measure its
size change thenceforth (but official data are available from 2001). According to this
definition, the category of irregular workers includes temporary workers, limited-term
contract workers, subcontract workers, dispatch workers, independent-contract work-
ers, home workers and daily hires. This is the same category of workers often called
non-standard or precarious workers in other countries (Kalleberg and Hewison 2013).
Regular workers on the other hand include the full-time employed with a long-term
employment contract. According to the government statistics, the proportion of irre-
gular workers increased sharply from 26.8% in 2001 to 37% in 2004, then began to
 JOURNAL OF CONTEMPORARY ASIA 5

60 56.6 55.9 56.1

55.7 55.4 55.0 54.2
55 52.1 51.9
50.4 49.4
50 47.8
45.9 45.4 45.0
45

40 37.0 36.6 35.9

35.6 34.9
33.8 33.4 34.2 33.3
35 32.6 32.6 32.4 32.5

30 26.8 27.4

25

20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Irregular1 Irregular2

Figure 2. Proportion of irregular workers, by two measures of irregular workers

Note: Irregular 1 is based on the government definition of irregular workers; Irregular 2 is based on labour advocacy
groups’ definition.
Source: KLI (2016); KLSI (various years).

decrease, at an exceedingly slow pace, to 33.8% in 2008 and to 32.5% in 2015 (see Figure
2). The important fact to notice is that even in the mid-2010s, about one-third (by
government statistics) or 45% (labour groups’ statistics) of the workforce was employed
in non-regular, precarious jobs. And they were found in every industry, every type of
firm and every size of firm; even the public sector held about 20% of employees in
irregular positions in the 2010s (Kim 2004; Lee 2015).

Regular versus Irregular Workers

The rise of irregular workers since the early 1990s and the stubborn continuation of
their large presence despite several policy measures adopted to reduce this number tell
much about the precarious condition of the labour market for Korea’s working popula-
tion. These trends also reveal a new and major source of growing inequality. This
dualistic labour market is a source of serious income inequality and discrimination. As
seen in Table 1, the average income of irregular workers in 2010 was 54.8% of that of
regular workers (based on government statistics). The differential remained about the
same in 2015, at 54.4%. According to labour groups’ estimates, the income differential is
even bigger; they claim that irregular workers received 46.9% of regular workers’
income in 2010, which increased to 49.8% in 2015. On average, irregular workers
earned about half of regular workers’ wages for the same number of hours worked.

Table 1. Ratio of irregular workers’ wage to regular workers’

2002 2005 2010 2015
Regular workers’ wage 100.0 100.0 100.0 100.0
Irregular workers’ wage 1 67.1 62.7 54.8 54.4
Irregular workers’ wage 2 52.7 50.9 46.9 49.8
Note: Irregular 1 based on the government definition of irregular workers; Irregular 2 based on
labor advocacy groups’ definition.
Source: KLI (2016); KLSI (various years).
6 H. KOO

This is a relatively new phenomenon of twenty-first century Korea, as this labour

market duality did not play such an important role in producing income differentials
in the pre-1990s period.1
Korea had many temporary and daily workers even during the pre-crisis period. But
during that time, regular and irregular workers did not really constitute two sharply
distinguished categories of labourers. This was because the job market was more open
and fluid and allowed easy mobility from temporary to permanent job positions. In
addition, even the regular workers with standard contracts were not well protected by
labour laws, unions or the government. Since the late 1990s, however, firms have deliber-
ately attempted to use non-standard workers as a means of reducing labour costs and
counter-balancing the power of the legally protected regular workers (Kim 2015a; Lee 2016)
Furthermore, irregular workers are greatly disadvantaged in terms of other forms of
compensation and social protection. Most receive no severance pay, medical insurance
or other company welfare subsidies that are available to regular workers (see Figure 3).
Irregular workers are also barred from joining the unions that represent regular work-
ers. Very few unions specifically organised to represent irregular workers do exist but
they represent 1.9% of irregular workers who are largely powerless to improve their
second-class status in the labour market where, in 2015, 20.9% of regular workers
belonged to unions. What makes this situation worse is that opportunities to move
from non-regular to regular jobs are very limited. According to one study undertaken
in the 2010s, the number of irregular workers who moved to regular job status after
three years of employment was 22.4% of the total number, while 50.9% continued to
work as irregular labourers and 26.7% became unemployed (OECD 2015).
The population groups most likely to be found in non-regular jobs are young people
(under 20 years old), old people (over 60 years) and women. In 2015, almost 90% of

96.6 98.8 99.4 96.2

89.5
84.4

70.2

38.9 38.7 38.5

32.4 33.6

24.8
18.8

National Pension Health Insurance Unemployment Retirement Bonus Overtime Paid vacation
Insurance Insurance payment

Regular employed Non-regular employed

Figure 3. Social protection for regular and irregular workers, 2015

Source: KLSI (2016).
 JOURNAL OF CONTEMPORARY ASIA 7

99.6
100
91.2
87.3
90 83.7
91.3
80 89.2
73.1 82.5

70
71.3 62.3
57.6
60 67.9
55.8
50.7
50 43.9
36
40 33.7
41.7
30 36.2
32.7
28
20 26.1 25.1
23.8

10

0
Under 20 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 Over 70

Female Male

Figure 4. Proportion of irregular workers, by age and gender

Source: KLSI (2016).

workers under the age of 20 were employed in irregular jobs. Many of them were
college students working as part-time hires earning minimum hourly wages in the
service sector. The proportion of irregular workers also increases sharply in the age
groups above 60 years (see Figure 4).
Gender plays an equally important role in determining employment status. In 2015,
55.3% of employed women held irregular jobs, compared to 36.4% of irregularly employed
men. In the age group 30–34, 36.7% of women workers were in irregular jobs, while 25.1%
of the men were irregular workers. And, at 35–39, 45.0% of women and 23.5% of men who
were employed held irregular jobs (see Figure 4). While the probability of being pushed into
irregular jobs increases greatly when male workers enter their fifties, the probability for
female workers arrives more quickly, in their early thirties.

Large versus Smaller Firms

Another important sectoral cleavage that has developed during the past two decades is
between large firms and smaller firms. Since the 1997 crisis, a small number of Korea’s large
firms have adapted to global challenges successfully, while most medium- to small-sized
firms have barely survived the increasing international competition from emerging econo-
mies. This unbalanced growth of industry has resulted in widening inequality between
different types of firms in recent decades. In the pre-1990s period, pay differences between
large and medium-to-small firms were relatively modest but they increased significantly
afterwards. Table 2 shows that the average income at medium-to-small firms was as large as
96.7% of the average income at large firms (employing 300 or more) in 1980. But this ratio
8 H. KOO

Table 2. Income differential between large and smaller firms

1980 1990 2000 2010 2014
Large firms 100.0 100.0 100.0 100.0 100.0
Smaller firms 96.7 79.9 71.3 62.9 62.3
Note: Large firms refer to firms hiring 300 or more workers; smaller firms include those hiring fewer
than 300 employees.
Source: Adapted from Chang (2015, 94).

decreased to 79.9% in 1990 and to 71.3% in 2000 and then to 62.9 in 2010; the gap remained
at that level in 2014. But an important fact is that the income differential between employees
of large and smaller firms is almost as large as that between regular and irregular workers.
In fact, Jung (2013) argues that income disparity between large and smaller firms is a more
serious problem than that between regular and irregular workers. This large income
differential between large and smaller firms is due to many factors but a critical source is
the fact that many smaller firms have become sub-contractors to large firms and are
subjected to highly unfair and exploitative business relationships with the latter. More
troubling is the fact that the Korean industrial structure has become more severely
unbalanced and dualistic in the global era, with only a small proportion of the nation’s
labour force employed at large firms, while the majority work at medium- and small-sized
firms. In 2014, 81% of the total labour force was employed at medium-to-small-sized firms,
while only 19% were at large firms (Chang 2015, 93).
But all large firms are not the same. A great difference in wage levels exists between
conglomerate (chaebol) firms and the rest of the large firms. For example, in 2014, while the
average annual income for the employees of firms employing 300 or more was about US
$52,000, the pay of employees of the huge Samsung Electronic was about $92,000 and that
of Hyundai Motors’ employees was about $88,000. That means the average income at most
large firms was less than 60% of the income at top chaebol firms (Chang 2015, 93).
In short, two prominent factors have emerged as critical causal factors of income
determination in addition to educational and other demographic factors: employment
status (regular versus irregular) and the size of the enterprise where one is employed.
Although these two factors were not unimportant before the 1990s, their wage-differ-
entiating effects have become far greater in the twenty-first century. The aggressive neo-
liberal globalisation that the South Korean economy has pursued over the past two
decades has increased the causal power of these two job market factors, thereby
increasing the level of income inequality.

Self-Employment Sector
Along with these adverse changes occurring in the job market for the employed labour
force, a no-less-grim reality exists in the world of self-employment. Korea has tradi-
tionally had a large number of self-employed workers. In 2014, the self-employed
accounted for 27% of the Korean labour force, which was the fourth highest rate
among the 34 OECD countries. The majority – about 74% – are solo-operators with
no employees. Their businesses are heavily concentrated in retail and restaurant
industries and in some personal services.
 JOURNAL OF CONTEMPORARY ASIA 9

In the past, small independent businesses provided job opportunities to many new
urban migrants from the countryside. Many small businesspeople who lacked adequate
formal education were still able to earn a decent income and accumulate a modest
amount of assets, thereby becoming able to climb up to the middle class. They
purchased houses of their own, sent their children to college and were able to maintain
a decent middle-class lifestyle. Thus, independent businesses functioned as an alter-
native channel for upward social mobility in the rapidly industrialising Korean society.
But the world of small business has experienced much adverse change in the 2000s. First
of all, the independent business sector became saturated with many new entrants who had
been pushed out of their formal employment. Many white-collar and managerial workers
who had been laid off found no other alternatives in the labour market and decided to start
a new business, often with hardly any business experience. While the number of small
businesses continued to increase, the slowdown of the economy depressed consumption
demands. Even worse, large conglomerate firms were encroaching into small business
sectors at the same time. Eating and drinking places, supermarkets and service businesses
have been increasingly taken over by chain stores run by chaebol-level firms.
In such a business environment, the failure rate is bound to be very high and the
income situation of the self-employed very poor. According to national statistics, more
than half of newly started small businesses go bankrupt within three years (Lee 2015, 6).
The economic situation of the self-employed can be seen by comparing their income
with those of wage-earning workers. The average monthly income of the self-employed
in 2014 was about 60% of the monthly income of regularly employed workers. This is a
remarkable drop from the past when the average earnings of the self-employed were
about the same as the income of the average wage worker. In 1990, the average income
among the self-employed was 95% of the average wage income, but this dropped to 88%
in 2000 and continued to decline to reach 60% in 2014. Thus, as Lee (2015, 6) argues, “it
is crucial to approach the self-employed in Korea as an insecure class,” because “the
lower strata of this sector suffer from excessive competition, low levels of net profit, a
high burden of household debt, extended working hours and few possibilities for social
advancement.” Thus, the job market position of many self-employed workers is as
precarious as that of non-regular workers (though they constitute two separate cate-
gories in labour statistics).

Income Concentration at the Top

Along with the growing inequality occurring in the labour market, another important trend
to notice in Korea is the increasing concentration of income at the top of the income
hierarchy. Reliable studies on income concentration among the rich in Korea were sparse
until recently. But given the gravity of inequality issues and thanks to the influence of
Piketty’s landmark study (2014) of income inequality in advanced capitalism, Korean
scholars have begun to produce reliable analyses of income concentration at the top (see
Kim 2012; Hong 2015; Joo 2015). They have followed a similar methodology to that of
Piketty, relying more on tax data than household survey data, which are known to under-
represent income earners at the top and at the bottom. Among others, Nak Nyun Kim and
his colleagues have done intensive analyses of Korea’s top income distribution in recent
years; I rely heavily on their studies in this article (Kim 2012, 2016; Kim and Kim 2015).
10 H. KOO

50

45

40

35

30

25

20

15

10

0
1980 1985 1990 1995 2000 2005 2010 2012

Top 10% income share Top 5% income share Top 1% income share

Figure 5. Ratio of income share by top income groups

Source: World Inequality Database (2015).

Figure 5 presents data on the changing shares of national income received by the top
1%, 5% and 10% income groups over the past three decades. The data used for this
analysis are from the World Inequality Database (2015), the original sources of which
are tax reports compiled by each nation’s tax bureau. Data displayed in this figure show
that compared to the earlier period (1980–1985) when the shares of top income groups
hardly changed, the post-1990s period saw significant income growth among those
belonging to the upper 10% of the income hierarchy. The income share of the upper
10%, for example, had remained constant at 28% from 1980 to 1985 but began to
increase dramatically from 29.2% in 1995 to 44.8% in 2012. Similarly, income shares of
the top 5% and top 1% did not increase but actually decreased slightly during the 1980–
1985 period, but in the recent period they increased dramatically. The income share of
the top 5% increased from 19.2% to 30.1% between 1995 and 2012, while that of the top
1% increased from 6.9% to 12.2%. The data clearly demonstrate that the post-1990s
neo-liberal era was a period of rapid income concentration in the top income groups.2
In their detailed analysis, Kim and Kim (2015, 16) confirm that income concentra-
tion has been more dramatic at the very top of the income pyramid. They report:
While the top 1% wage income share increased from 4.89% in 1995 to 7.45% in 2010, the
top 0.1% wage income share increased faster from 1.27% to 2.16% during the same period.
It implies that the average wage of the top 0.1% wage earners in 2010 was 21.6 times
greater than the average wage of all wage earners whereas it was just 12.7 times greater in
1995 (Kim and Kim 2015, 16).

This changing pattern of income distribution in favour of the upper-income groups can
be seen more concretely by examining the average income levels among different income
groups over the longer period of Korean development. The data presented in Figure 6
 JOURNAL OF CONTEMPORARY ASIA 11

1000
Million won at constant 2010 Prices in log scale

100

10

1
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
top 0.1% top 1-0.1% top 10-1% total bottom 90%

Figure 6. Average wage income by income groups, 1993–2009

Source: Adapted from Kim and Kim (2015, 12).

display the change in the average income received by different decile income groups from
1995 to 2010. This figure again demonstrates that during the earlier period of rapid
industrialisation, every income group saw their income grow at a similar rate.
Remarkably, the bottom 90% experienced the same rate of wage growth as that of the top
10%. Since the economic crisis, however, we see a markedly different pattern. Wage
increase for average workers has been minimal, while income for the upper 10% has
continued to increase. What is more, of the top 10%, income for the top 0.1% increased
much faster.
This income trend among the top income groups contrasts with that shown in
Figure 1, which demonstrated a declining tendency of income inequality among the
whole population in the recent period. But no similar trend is detected at the upper part
of income hierarchy. That means that during the 2009–2015 period income disparity
among the bottom 80% declined somewhat but income concentration at the top 10% or
20% continued. That suggests that income distribution at the top and below may be
subject to different factors and different causal mechanisms. A more careful analysis is
required to tease out these factors.
As to factors that have contributed to income concentration at the top, we can consider
several factors, structural, technical and policy related. In terms of structural factors, the
most important is the fact that by the 1990s the South Korean economy had become a
technology- and knowledge-intensive economy and began to transfer low-skilled manu-
facturing production to low-wage economies like China, Vietnam, Indonesia and others.
This industrial transition has naturally increased the value of high technical skills. Those
who possessed scarce professional and technical skills came to command exceptionally
12 H. KOO

high remuneration. Since the 1990s, large firms have gradually replaced their old, senior-
ity-based payment systems with performance-based systems (Jung and Cheon 2006).
Thus, intra-firm pay differentials widened as pay became tied to employees’ skill levels
and job performances, contributing to the overall increase of income inequality.
Furthermore, a significant change has occurred in the governance system in large
conglomerate firms since the 1990s. Most of these firms began to adopt the Anglo-
Saxon corporate governance system that is oriented to the interests of stock owners,
equity financing and short-term performance in the stock market. This transition has
been accelerated also by a growing number of foreign shareholders that began to
influence the governance systems in large Korean firms (Chung et al. 2008; Kim and
Kim 2015). With this corporate change, chief executive officers (CEOs) began to play a
far more important role than before and command exceptionally high salaries and other
financial rewards. So, as in advanced economies, the neo-liberal transition of the
Korean economy has produced what Piketty (2014, 265) calls the “supermanager” or
“super salariat” phenomenon, in which top CEOs receive tremendously high salaries
plus lucrative packages of financial compensations.3
If the newly emerging group of CEOs constitute a major part of the super-rich in
Korea today, another important group is composed of high-income professionals. One
study of the occupational composition of the upper 1% found that most of them are
professional and managerial workers in the medical and financial sectors (Hong 2015,
205). Particularly important occupational groups are medical doctors, pharmacists and
financial specialists. Most likely, they are the ones who possess special skills and
reputations in their fields and may also own their own independent businesses. The
rise of financial specialists among the top income group must be closely related to the
financialisation of the Korean economy, an essential feature of neo-liberalisation in all
advanced economies (Harvey 2005; Kotz 2015).
Outside the occupational system, another factor that facilitated income concentra-
tion at the top in Korea was a change in the tax system, more specifically the reduction
of tax rates for the rich. The highest statutory marginal tax rates for the top 0.1%
income level were as high as 70% in the second half of the 1970s but decreased to 50%
in the first half of the 1990s and then to about 35% in the 2000s (Kim and Kim 2015,
14). During this period, capital income increased much faster than wage income among
top income earners. Thus, naturally, the combined effect of these two factors must have
contributed greatly to the rapid wealth accumulation at the top.

Forms of Polarisation
The data examined thus far have confirmed a powerful trend of polarisation occurring in
Korean society in the neo-liberal era. But this polarisation is not a simple process of
dividing the population into two classes of rich and poor or capital and labour, but involves
a more complex process. Basically, there are two forms of polarisation. One is the widening
gap between the top income group and the rest of the population, with a heavy concentra-
tion of income at the top and declining income in the middle. The other is growing income
disparity occurring in the labour market, between regular and non-regular workers and
between employees of large firms and of medium-to-smaller firms.
 JOURNAL OF CONTEMPORARY ASIA 13

The first form of economic polarisation is a well-known phenomenon in most

advanced industrial societies. The Occupy Wall Street movement in the USA that
occurred in the aftermath of the 2008 global financial crisis popularised the phrase
“the top 1% versus the bottom 99%,” and this idea has resonated with many other
societies, including in Asia (see Hewison 2019). Piketty’s influential 2014 book has
provided compelling evidence of income polarisation in all advanced capitalist econo-
mies and Stiglitz (2012) has provided a powerful analysis of its manifestation in the
USA, while Milanovic (2016) has also provided rich information on global inequality
patterns. The data reviewed above confirm that Korea is not an exception. In fact, South
Korea has experienced this polarisation process more intensely than most other indus-
trial societies in recent decades. Thus, the image of a polarised society divided between
the top 1% and the bottom 99% eminently applies to today’s Korean society.
But if we look at the income distribution pattern more closely, it is not just the upper 1%
but a broader segment, including the top 10%, that has experienced a substantial increase in
their income share during the past two decades. The data in Figure 5 reveal that the average
income level among the upper 10% group has grown almost as fast as that of the upper 1%,
in contrast to the stagnating income among the bottom 90%. Most likely, those in the upper
10% income bracket are higher-level professional, managerial and technical workers, whose
income has grown rapidly during the decades of the neo-liberal transition in the Korean
economy. They are the elite workers employed in the leading sectors of the economy and
have benefited from the globalisation of the economic system. The upper 10% group also
includes non-salaried wealthy people who have accumulated wealth through real estate
investment during the housing market bubbles of the past two or three decades. In fact,
many professional and managerial people have also become well-to-do through investing
in the real estate market.
Thus, we can look at the economic polarisation in Korea as involving two tiers: at the
first tier we have the division between the top 1% and the bottom 99%, while at the
second tier, we have the division between the upper 10% and the bottom 90%. These
are not separate phenomena. If the top 1% represents the large capitalists, the upper
10% includes top managers and professionals who serve the capitalist class. The wealth
differential between the two groups is very large but they share a common interest in,
and are benefited by, the same capitalist system. Both groups have benefited greatly
from Korea’s shift to an advanced and globalised economy and have emerged as the real
winners of the neo-liberal transition.
The second form of polarisation has occurred within the larger working class, along
the axes of labour market segmentation that we have discussed above – between regular
and non-regular workers and between employees of large firms and those of medium-
to-smaller firms. Presumably, this labour market polarisation has a more divisive
impact on the rank-and-file workers than among the upper 10% or 20%. These two
axes of labour market division cut across industrial and occupational categories,
producing internal divisions within the working class and the middle class, while
blurring the boundary between these two classes. Thus, the class situation of white-
collar workers employed on non-standard contracts or at smaller firms would occupy
an inferior position to that of regular blue-collar workers employed at large conglom-
erate firms. In the new labour market, occupational category is less significant in one’s
14 H. KOO

class position; instead, labour market position, defined by level of job security and the
social protection attached to it, has become critical in determining class position.
It must be reiterated that the Korean working class had been relatively homogeneous
during the period of rapid industrialisation, with no sharp divisions based on types of
employment or the size of firms where one is employed. But much change has occurred
in this regard, as we have seen. In many large firms today, regular and irregular workers
constitute almost two different working classes. Similarly, blue-collar workers at large
firms and at smaller firms are located in significantly different market positions in terms
of income and social protection, regardless of their status as regular or irregular work-
ers. While all the workers at smaller firms suffer low wages, the blue-collar workers at
large conglomerate firms have seen their wages increase tremendously since the 1990s,
especially if they are members of powerful unions. Defined frequently as a labour
aristocracy by the media and conservative politicians, these privileged workers now
belong to the middle class in terms of their economic and social status. Thus, the
working class has lost much of the internal class homogeneity that existed during the
early period of rapid industrialisation led by the authoritarian developmental state.

Middle Class Decline and Internal Division

More interesting and complex changes have occurred in the middle class. The dominant
discourse on the middle class in Korea, as in most other advanced societies, is about the
continuous decline or shrinking of this class in the midst of post-industrial and global
economic transition. Having seen the vigorous growth of the middle class in the industrial
era, Korea has experienced a significant decline of this class since the 1997 crisis. The data
presented in Figures 7 and 8 show the changing lot of three income classes, those earning
more than 150% of the median income, those earning 50–150% and those earning 50% or
less. Figure 7 shows that while the upper- and lower-income groups increased in size, the
middle-income group (50–150%) shrank. Between 1996 and 2010, the proportion of the
upper-income group increased from 27.3% to 32.5% of the labour force and the lower
group also grew from 19.2% to 22.1%. In sharp contrast, the middle-income group declined
from 53.4% to 45.4%. Thus, the shrinking middle class in Korea is as serious a social
problem as in most other advanced industrial societies.
Figure 8 presents the share of national income distributed to each income class
during the period from 1996 to 2010. The data demonstrate that the income share for
the upper third group increased from 51% to 65.5%, while the share for the bottom
third decreased slightly, from 5.1% to 4.3%. In contrast, the income share for the
middle-income group decreased from 43.9% to 30.2%. Clearly, the shifts in income
distribution during the past decade and a half have been most favourable to the upper
third (more accurately, the top echelons of this statistical group) and the most unfa-
vourable to the middle-class earners. Significantly, it is the middle-income group rather
than the low-income group that has experienced the most negative consequences of
neo-liberal globalisation during this period.
While the most important fact about the Korean middle class these days is its
economic squeeze and its shrinking size, it is important to notice another side of
middle-class change in the recent period, which is the rise of a new, affluent middle
class in the midst of the overall middle-class decline. As we have seen above, the upper
 JOURNAL OF CONTEMPORARY ASIA 15

60%
53.4%
51.2%
50% 46.5%
45.4%

40%

32.6% 32.5%
30.3%
30% 27.3%

22.1%
21.0%
19.2% 18.5%
20%

10%
1996 2000 2006 2010

more than 150% 50-150% less than 150%

Figure 7. Relative size of three income groups, 1996–2010

Note: Income groups are divided by each group’s income position relative to the median income of the nation. Income
data were drawn from national household surveys plus individual tax reports.
Source: Adapted from Kim (2012, 23).

70% 65.3% 65.5%

58.4%
60%

51.0%
50%

40% 43.9% 36.5%

30.3% 30.2%
30%

20%

10%
5.1% 5.1% 4.5% 4.3%

0%
1996 2000 2006 2010

more than 150% 50-150% less than 150%

Figure 8. Income share of three income groups, 1996–2010

Note: Income groups are divided by each group’s income position relative to the median income of the nation. Income
data were drawn from national household surveys plus individual tax reports.Source: Adapted from Kim (2012, 23).
16 H. KOO

10% income group has experienced substantial income growth in the past two decades.
In fact, other studies suggest that the upper 20% income group has also increased its
share of income significantly in the past two decades (Cheon 2016; Kim 2012; Kim and
Kim 2015). If so, it may be reasonable to assume that the beneficiaries of the recent
income distribution include this larger segment, the top 20% of income earners, rather
than just the upper 10%. Where to draw a meaningful boundary in the upper sections
of the income hierarchy is a tricky question. Some studies suggest that if we consider
both income and wealth, rather than income alone, the upper 10% looks far richer than
the 11–20% group (Cheon 2019; Lee and Jeong 2018).
Regardless of whether we must take the upper 10% or 20% as the winners of neo-liberal
income distribution, what is important to recognise is that they represent what is com-
monly understood as the upper middle class. Those who belong to the upper 10% of the
income hierarchy, in particular, are most likely to be higher-ranking professional and
managerial workers and small- to medium-sized business owners, who are, sociologically
speaking, members of the upper middle class. Some of them may be quite rich, but their
possession of economic and social capital is substantially less than that of the upper class. In
Korea, and in most other societies, the upper class generally means the people who possess a
great amount of wealth, accumulated over generations and who also possess a substantial
amount of political power and social influence. Most of the new Korean rich whom I have
interviewed in recent years denied that they belonged to the upper class and preferred to
identify themselves as just middle class or upper middle class.
It is true that well-to-do middle-class people did exist in Korea in earlier times and
their existence today is not a novel phenomenon. But I would argue that today’s affluent
professional and managerial groups are distinguished from yesterday’s old rich in
several aspects. First, in the old days the middle class was relatively open and fluid
and allowed many opportunities for ordinary middle-class people to become rich
themselves. Even if they did not become rich, most people saw their income growing
at a somewhat comparable rate to that of the better off. In contrast, today’s new rich
have emerged in the midst of a deteriorating income situation for most middle-class
people, which means their rise is a consequence of income polarisation rather than
gradual income growth for all. Second, in earlier times many of the rich were people
who made money through non-wage income, mostly through speculative investment in
the real estate market (Son 2008; Yang 2018). Thus, they were often looked down upon
as the vulgar rich (jolbu). But, today, the affluent middle class is more likely to be
represented by corporate elite and high-income professionals rather than just asset-rich
people. They can boast of their and their children’s high educational qualifications and
cultural sophistication and justify their class privilege in terms of meritocratic values,
claiming higher status due to their superior education, talent and hard work. Third,
today’s affluent middle-class people live increasingly in segregated residential areas,
concentrating in the well-known upper-middle-class Gangnam neighbourhood of Seoul
and they are keen to demonstrate their status through conspicuous consumption styles
and their pursuit of exclusive education strategies for their children. They are at the
vanguard of a cosmopolitan lifestyle and a global approach to their children’s educa-
tion. Thus, in terms of their lifestyle, educational practices and mobility patterns, this
newly emerged group of affluent professional and managerial workers represents the
most globally oriented or a globalised middle class (Koo 2016).
 JOURNAL OF CONTEMPORARY ASIA 17

Conclusion
The dominant pattern of change in Korea’s income distribution over the past two
decades has been polarisation along several axes of labour market division as well as by
skill and capital endowments. Thus, what distinguishes the post-1990s period from the
earlier period is not just a higher level of inequality but a more complex pattern of
inequality. Income differential has grown larger between regular and irregular workers
and between employees of large firms and those of smaller firms, along with the
deteriorating market position of self-employed people. Apart from this labour market
segmentation, the post-1990s neo-liberal transition has greatly widened gaps between
the winners and losers of economic competition according to neo-liberal criteria,
resulting in the increasing concentration of income and wealth at the top and deepen-
ing economic instability and insecurity among the masses of the labour force.
Yet the polarisation of the Korean class structure reveals more complexity than is
easily captured by such popular notions as the top 1% versus the bottom 99% or the
disappearing middle class. Our data analysis suggests that it may be more reasonable to
look at economic polarisation at two levels – one between the top 1% and bottom 99%
and the other between the top 10% and the bottom 90% (or the top 20% and the bottom
80%). While scholarly and media attention has been focused on the first form of
division, the second one is no less important because it relates to complex changes
occurring in the middle class. While it is true that the larger middle class has been
declining and shrinking in the neo-liberal era, not all its members have suffered from
recent economic change. Instead, a minority of its members (including high profes-
sional and managerial workers and some small entrepreneurs) has benefitted from the
skewed income distribution and has emerged as the new affluent middle class.
Therefore, the middle class has become internally divided and a new class boundary
has occurred between this new affluent middle class and the ordinary middle class and
has become more important in determining people’s life chances than the old class
distinction between the working class and the middle class.
The newly emerged affluent middle class is distinguished from its old counterpart in
terms of their educational and skill qualifications, their function in the capitalist system
and their global connectivity as well as their lifestyles and orientations. As such, they
enjoy many privileges – economic and social – which had not been available before the
economy became neo-liberal and globalised. With their economic affluence and their
superior access to global opportunity structures, today’s new rich are actively engaged
in all kinds of class distinction strategies – including residential segregation, conspic-
uous consumption, luxury leisure and globalised education – to separate themselves
from the other, ordinary middle-class members. Therefore, the emergence of this new
affluent segment within the middle class has rendered the middle-class identity far more
problematic and perplexing than before.

Notes
1. As mentioned above, the Korean government adopted a standard definition of irregular
workers only in 2002. As Shin (2012, 337–338) states, “marginalized [irregular] workers
18 H. KOO

were not recognized as an important social and economic category until neoliberal
economic reforms were fully implemented after the financial crisis in 1997.”
2. Korea’s income share among the rich (top 1%) was similar to that of the Japanese pattern
in the 1980s, but from the late 1990s began to diverge from the Japanese pattern and
followed the same steep upward curve as found in the USA (Kim and Kim 2015).
3. Kim and Kim (2015, 16) write: “Without mature manager markets in Korea, large
corporations, particularly chaebols having many affiliated companies, activated the internal
labor markets for corporate officers, delegated management to professional officers, and
controlled them through monitoring and performance-based rewards. Many CEOs in large
corporations received exceptional pay raises along with stock options.”

Acknowledgments
The author is grateful for data provided by Nak Nyeon Kim.

Disclosure Statement
No potential conflict of interest was reported by the author.

Funding
This work was partially supported by the Overseas Core University Program for Korean Studies
through the Ministry of Education of Republic of Korea and the Academy of Korean Studies
[AKS-2015-OLU-2250005].

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