Bank of Korea warns of widening wealth, income gaps in South Korea
· UPIJune 11 (Asia Today) -- South Korea is facing widening gaps in both wealth and income, with young people and those without homes losing ground economically, Bank of Korea researchers said Wednesday.
The central bank's research department made the assessment in a report titled "Household Polarization in the Korean Economy and Its Spillover Effects." The report said South Korea is confronting a form of dual polarization as asset and income inequality expand at the same time.
According to the report, South Korea's net wealth Gini coefficient fell to 0.584 in 2017 but has since risen, reaching 0.625 last year. A Gini coefficient closer to zero indicates greater equality, while a figure closer to one indicates greater inequality.
The report identified rising real estate prices as a key factor behind the widening asset gap. It said higher property prices have played a central role in explaining movements in wealth inequality.
The Bank of Korea researchers also said real estate assets are concentrated among older generations, making wealth inequality between generations more structural.
The conditions for young people to build assets have deteriorated, the report said. An increasing number of young people earn relatively high incomes but cannot enter the upper wealth bracket because they do not own real estate.
The report said the mobility that once allowed people with middle- to upper-level incomes to move into the top wealth group has weakened, undercutting the asset-building ladder for younger households.
Income inequality also shows signs of widening again. The disposable income Gini coefficient fell from 0.353 in 2016 to 0.323 in 2023 but rose slightly to 0.325 in 2024.
The report said income inequality, which had improved through redistribution policies, could widen again because of K-shaped growth across industries.
Researchers identified the gap between the information technology sector and non-IT industries as a driver of income polarization. In the IT sector, wages have risen sharply, led in part by bonuses, while wage growth has been limited in other industries.
The spread of artificial intelligence could further deepen income gaps, the report said. Researchers said AI technology, combined with advances in robotics, could replace jobs held by low-income workers and young people in the early stages of their careers.
A Bank of Korea survey on AI also found that people in lower income brackets were more likely to believe their jobs could be replaced by AI.
The impact of dual polarization is especially visible among young people. The share of people in their 20s and 30s among households in the bottom quintile for both net wealth and income rose from 7.9% in 2020 to 15.2% in 2025.
The report said this suggests young people without homes are increasingly being pushed into lower economic groups.
The Bank of Korea researchers warned that dual polarization could weaken productivity and consumer vitality across the economy.
An analysis using data from 120 countries found that when the share of wealth held by the top 10% rises by 1 percentage point, total factor productivity falls by 0.16% two years later.
In South Korea, the share of net wealth held by the top 10% increased from 43.0% in 2022 to 46.1% in 2025, up 3.1 percentage points. Researchers said widening wealth inequality could become a constraint on economic growth and productivity improvement.
The social costs could also increase. The report said widening wealth and income gaps may lower expectations for upward mobility, weaken work incentives and reduce social trust.
It also warned that high housing costs for young people could become a barrier to marriage and childbirth.
The researchers said redistribution policies focused mainly on income support are not enough to respond to dual polarization. They said South Korea needs to guide household assets, which are heavily concentrated in real estate, toward more productive sectors and expand opportunities to build productive assets.
The report also called for a more stable tax base in response to economic changes driven by technological development. It said institutions should be reviewed to ensure that the path from labor income to asset formation does not deteriorate further.
Researchers also said South Korea must strengthen new growth industries so the benefits of economic growth can spread more widely across the economy.
-- Reported by Asia Today; translated by UPI
© Asia Today. Unauthorized reproduction or redistribution prohibited.
Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260611010004200