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362. What Is Your Spoon?-The Economics of Inequality

Lee, Yu-jeang, Park, Su-yeon 기자2016.06.18 03:32:24

We cannot talk about the Korean election without talking about economic growth and distribution. Is the Korean government killing these two birds with one stone? Here is an interview with Professor Lee, Joung-woo who wrote The Economics of Inequality and has lectured in Kyungpook National University (KNU) since 1977. In this interview, we would like to focus on the minimum wage, unearned income, and income inequality in Korean society.

Professor Lee, Joung-woo

Q1. What do you think about the Growth First Policy of Korea?

A1. Since the 1960s, the Korean government has been adhering to the Growth First Policy, which means to grow the nation’s economy first, and distribute the wealth later. Koreans often think that it is the only suitable policy because they have been brainwashed with this idea, so that it is familiar and comfortable to them. However, we need to question this policy since, for half a century, there has been only growth, and no sharing. There is an economic theory similar to the Growth First Policy which is called [1]Trickle-down Theory. This Theory is a mere twaddle that has never been proved. Many recent studies show that fair distribution helps economic growth, and poor distribution hinders growth. Some of the most conservative and traditional organizations such as the International Monetary Fund (IMF), the World Bank, and the Organization for Economic Co-operation and Development (OECD) have announced these research results. In short, effective distribution is needed for growth.

Q2. What do you think about the [2]unearned income in Korean society?

A2. Korean income distribution is known to be modest. However, Korea’s distribution of wealth is poor, especially in the real estate field. This is the result of Korea’s land prices being some of the highest throughout the world, along with the unfair distribution of possession of land and buildings. This unfortunate circumstance is due to the previous dictatorial governments which did not contemplate the land matter’s importance, and only focused on short-term development projects to raise economic growth rate immediately. For instance, if you have own an apartment in Gangnam, you would probably be wealthy because of your good luck, not from your own efforts. The earning from an apartment is regarded as unearned income in Economics, and Korean’s drive to work is being obstructed by this unfair situation. Korea has the most unearned income in the world, and we must solve this problem.

Q3. What do you think is the reason that “[3]The Class Theory of Spoons” became a big issue in Korea?

A3. According to The Capital in the 21st Century, written by French Economist Thomas Piketty, capital increase has become a worldwide phenomenon over the past 40 years. This trend will continue in the future throughout the 21st century. He found that capital has increased in most of the countries, including developed countries, as well as developing countries. The capital increase naturally leads to the capital income increase, whereas labor income decreases. Capital owners are typically rich, and wage earners are relatively poor. Therefore, the increase of capital income is followed by the increase of income inequality. This tells us that capital owners will have more power than the working class in the future. Thus, the situation for wage earners will become worse no matter how hard they try. The problem is that this is a worldwide phenomenon. It has already resulted in the “Occupy Wall-street” movement in the U.S. and “The Class Theory of Spoons” in Korea. In the case of Korea, as Piketty stated, increase of capital has occurred, mainly in the real estate sector. Accordingly, the estate-rich are becoming more and more powerful in Korean society.

Q4. How does it affect the perception of inequality?

A4. In my opinion, The Class Theory of Spoons is contributing to propagation of the idea that wealth inequality is becoming more of a serious problem in Korea. Idioms like Born with the Gold Spoon are more persuasive and catchy than difficult theories, since people can understand them easily without any background knowledge. I believe changing the perception of people could bring policy changes. This would be desirable, as there are hardly any policies for the weak in Korea.

Q5. What do you think about the minimum wage system of Korea?                 

A5. Korea adopted the minimum wage system in 1987. This is excessively late as more than 70 countries throughout the world had already implemented the system at that time. The goal of setting the minimum wage is to ensure workers have the necessities to manage their life. However, Korea adopted it just because they were conscious of other nations, and did not have much intention to practically exercise the policy. For this reason, even after Korea adopted it, the minimum wage of Korea remained lower than it should have been. As a result, the minimum wage in Korea is only 30% of the average wage; this is awfully low compared to other countries’ rate of 50 to 60% of the average wage. In conclusion, the Korean minimum wage must be actively raised because it cannot satisfy its original purpose to protect workers from low wages, and to reduce inequality.

Q6. What inspired you to write The Economics of Inequality?

A6. When I went to the U.S. to further my study, I originally wanted to study a theoretical topic, The Capital Controversy. However, I found out that the argument had already come to an end. After that, I became interested in distribution problems. Stories such as that of Lim, Kkuk-Jung, a thief who is symbolic being from the lower classes, who rebelled against the rich and the higher classes in the Joseon Dynasty, always attracted my attention. Because of this, I was interested in problems based on inequality, justice and so on. I chose The Economics of Inequality among various categories as I wanted to administer the general state of the people to relieve their suffering by economics. After returning home, I decided to write this book as I could not find any textbooks in this field.



[1] A populist political term used to characterize economic policies as favoring the wealthy or privileged.

[2] An income received by virtue of owning property, inheritance, pensions and payments received from public welfare.

[3] The extended version of "born with a silver spoon in one's mouth", which describes the gap between the rich and the poor in Korean society.

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