Kwang-Yeong Shin
Compared with other East Asian countries such as Taiwan and Singapore, as well as other developing countries, South Korea is considered to have the lowest level of economic inequality. While there is still controversy over the relationship between the degree of income inequality and economic growth, which was a question raised in other East Asian countries, the low level of economic in equality in Korea is regarded as the key factor to Korea’s economic success (UNDP 1996, 52–53). Korea has been cited as an exemplary case for economic growth with relatively equal distribution.
However, social inequality in contemporary Korea remains the most understudied issue in Korean academia in the 1990s. While most Koreans believe themselves to be sensitive to social contradictions or inequality and also for having a strong sense of egalitarianism, there have been few empirical studies of social inequality in Korea in either Korean or Western social sciences. Some empirical research on income inequality in Korea has reported the Gini coefficients that have indicated the degree of income inequality in its gross term.
The financial crisis that began in late 1997 significantly transformed the structure of income distribution as well as the production system, altering employment structures, job opportunities, and economic compensation mechanisms. While the immediate consequence of the financial crisis resulted in massive unemployment with more than a recorded one million unemployed in 1998 and a rapid rise of irregular workers, the long- term effect of the crisis was a worsening of economic inequality and a polarization of income and asset ownership. In addition, the government, faced with the aggressive demands of the IMF, adapted a high interest rate policy, which contributed to the unexpected increase of wealth for the rich and consequently widened the gap between the poor and the rich. The long-term consequence of the economic crisis was a social crisis as well by increasing inequality and the number of the working poor. While South Korea was appraised as a successful case for its fast recovery from the economic crisis, its disruptive social impact could not be immediately nullified by the fast economic recovery.
In this chapter, I will address the issue of class inequality, exploring the extent to which class inequality exists and how class inequality is associated with education and gender in South Korea. An empirical analysis of income determination provides an understanding of income inequality generated by social classes, proving that social classes play a most significant role in shaping economic life in contemporary Korean society.
With the demise of the Eastern European states, the utility of social class as a concept became a topic of hot debate among not only Korean sociologists, but sociologists in the West as well. While the debate in the West has focused on the declining explanatory power of social class on political behavior and economic inequality, the debate in Korea has mainly focused on the decreasing relevance of social class in understanding politics in South Korea, and on new social movements since the 1990s. The core issue of the debate is not class inequality but the destiny of class politics associated with the relationship between class position and political attitude or action of social class (Clark and Lipset 1991; Pakulski 1993; Evans 1999). Empirical studies of class inequality, however, suggest that class inequality persists even in post-industrial societies such as America and Britain (Hout et al. 1993; Gordon 1996; Cotter and Hermsen 1999).
Class inequality can be described by economic inequality based on the social division of labor. Wright (1985 and 1997) argues that inequality of income and wealth is one of the central factors underlying the formation of social classes and social conflict. Economic inequality in industrial capitalism is an outcome of the structure of the inequality-generating mechanisms based on different types of ownership: ownership of capital assets, ownership of organization assets or simply authority, and ownership of skill assets or credentials. Owners of capital assets hire other employees or can be self-employed without hiring other employees. In industrial capitalism, those who own productive property and hire other people can monopolistically appropriate outcome of economic activities of employees as profit. Those who do not have productive property are employed to get material resources as a different form of wages. However, there is class differentiation among employees associated with the different types of productive asset ownership. Those who have authority, scarce skills, and expertise can get monopoly rent which refers to premium, which is beyond the market wage. Monopoly rent is social surplus by scarcity in the labor market because there are systematic barriers in the way of increasing the supply of scarce resources to meet the demand of employing organization.
Employees with authority are able to appropriate surplus because “the strategic position of managers within the organization of production enables them to make significant claims on a portion of the social surplus” (Wright 1997, 20). Employees who possess professional skills and knowledge are able to appropriate surplus due to the scarcity of those skills and knowledge, which is sustained by systematic obstacles to the access to those skills and knowledge (Wright 1997, 22–23). Those who own authority or possess scarce skills and knowledge can be called the middle class. Those who do not own productive skills or authority, or scarce skills, belong to the working class.
According to another matrix of ownership, those who participate in economic activity can be classified into different social classes (Wright 1997, 24). Table 5.1 shows the basic class map of industrial capitalism.
While class inequality might be the most salient structural property in an industrial capitalist society, the extent to which class determines social inequality might vary across time and space. As many researchers argue, institutional features such as the seniority wage system or the collective bargaining system significantly affect the process of wage determination and the level of wages. Other labor market institutions and cultural factors might also affect the effect of class on individual income (Dore 1973; Esping-Anderson 1992; Freeman 1998; Rueda and Pontusson 2000). Furthermore, the importance of class in determining individual income and wealth can also be strongly correlated with gender or age. Nevertheless, class division still remains as the most important structural factor in determining one’s economic status in an industrial capitalist society. Although gender is an important determinant of income inequality, it is not an independent factor of income inequality. Gender inequality is always correlated with class inequality, as articulated through patriarchy and capitalism.
Data was collected in August and September of 2003, with 1,831 cases across the country, excluding Jeju-do province. Based on proportional probability sampling (pps), the sampling framework was designed to represent the significant proportion of the population in South Korea. The original number of interviewees according to the research design was 2,200, the interviewees having been between the ages of 20 and 65 at the time of interview. It excluded housewives and family workers who did not receive wages. The information from respondents was obtained by interviews conducted by professional interviewers.
To explore class inequality, we utilized monthly wages and income as indicators of the economic returns of individual’s economic activities. While inequality of assets such as housing and financial assets might be better indicators of class inequality, we used the wage indicator in order to compare the results of our research with that of others. Additionally, since it is difficult to obtain reliable and available information about an individual’s wealth, in this analysis
Table 5.1 Basic class typology
| Owning class | Non-owning class | |||
|---|---|---|---|---|
| Employers | Capitalists | Expert managers | Non-expert managers | Authority |
| Small employers | Experts | Workers | No-authority | |
| Non-employers | Petty bourgeoisie | Scarce skills/credentials | No-skills/credentials |
we use monthly income to measure economic inequality. In addition, class in equality in housing and education is also included in the analysis in order to capture the different dimensions of social inequality based on class.
In this study, we follow the classification of social class with respect to the factors of ownership, authority, and credentials suggested by E. O. Wright (1985 and 1997). Property ownership, authority within an organization, and credentials are major sources of class division in modern capitalist societies. First of all, according to the ownership status of means of production, the economically active population is divided into two categories: owners and employees. Owners are classified into three class locations so as to explore income variation with the owning class: the capitalist class that owns the means of production and hire of ten or more employees; small employers who own the means of production and hire less than ten but more than one employee; and the petty bourgeoisie who work alone or employ only one employee. According to the type of ownership of productive assets, employees are divided into four classes: expert managers who own authority, scarce skills, or expertise; non- expert managers who only own authority; experts who do not own authority but possess scarce skills or expertise; and workers who have neither authority nor scarce skills. In other words, those who have supervisory control over other employees in the process of work or have discretionary power to determine other employees’ wages and promotion are classified as managers. Employees who completed professional education in a university or graduate school and have professional occupations are considered to possess scarce skills or expertise.
Other independent variables are defined and measured in conventional ways. Education is measured by the number of completed years of education. For those who drop out from the various levels of education, one year is added to the completed years of education of the previous level of education. Age is measured by itself and squared. Industry is classified into four sectors, those being agriculture, manufacturing, the service industry, and the government.
For the last four decades, Korean society has experienced tremendous structural change in terms of industry and occupation as well as the economy in general. Rapid industrialization transformed the agrarian class structure into an industrial one. The industrial class structure constitutes the largest proportion of wage earners among the workforce, whereas the agrarian class structure makes up the largest proportion of the rural petty bourgeoisie including small peasants. The working class makes up 52.8 percent of the labor force, while the petty bourgeoisie is 24.7 percent of the force. The proportion of petty bourgeoisie is continuously declining mainly due to the reduction of farmers in rural areas. The proportion of farmers in the total workforce diminished from more than 60 percent in 1960 to almost 10 percent in 2003 (KNSO 2003, 189).
Table 5.2 presents the distribution of the labor force into seven class locations. At first glance, it appears that the working class comprises the largest
proportion of the labor force, while the capitalists comprise the lowest proportion of the labor force. While the proportion of the working class is quite similar to other industrial countries, the proportion of the capitalist class is relatively lower than in any other industrial country. The proportion of the capitalist class is 1.6 percent in Japan, 1.8 percent in the United States, and 2.1 percent in the United Kingdom (Wright 1997, 47). The small Korean capitalist class (0.9 percent) might be a consequence of the concentration of capital into a small number of large capitalists.
The distinctiveness of Korean class distribution lies in the proportions of the petty bourgeoisie being much higher than in any other industrialized country. With the proportion of petty bourgeoisie in Korea standing at 24.3 percent, which is three or four times as high as that of the US, Canada, Britain, or Sweden, this is considered an exceptional case in comparison to most other industrialized countries, except for Japan (23.2 percent) (see Wright 1997, 47–49).
Table 5.2 also presents unequal class distribution by gender, revealing that female employees are extremely small in number among the social classes with authority (within organization). The proportion of women (within class) is the lowest among the managers. The ratio of women among expert managers is only 6.5 percent, far below the proportion of women in the total sample, 45.3 percent. Women make up only 16.2 percent of non-expert managers. On the other hand, the proportion of women is greater than that of men in the working class. While there is only a small difference between men and women as owners, there is a striking difference between the genders among the ranks of employees.
Table 5.3 displays income inequality across the social classes in South Korea in 2003. In general, the owner class earns a far higher income than the non-owner class. This indicates that ownership status and types of employment significantly affect the level of an individual’s income. As we might expect, the monthly
earning of capitalists is highest among seven classes with 3,118 million won. But there is a large standard deviation of 32.80 million won, implying that there is a significant internal variation of income among capitalists. Small employers also show a high monthly income of about 4.90 million won. The average monthly income of the petty bourgeoisie is about 2.30 million won. In sum, Table 5.3 shows that owners of means of production enjoy much larger income than non- owners and the size of monthly income among owners is strongly correlated with the number of employees.
Table 5.3 also indicates that there is a systematic variation of income among employees. While expert managers display the highest monthly income of 2.32 million won, workers display the lowest monthly income with 1.25 million won. Those who have authority, such as expert managers and non-expert managers, earn much higher monthly income than those who do not have authority, such as experts and workers. The mean of monthly earnings of both managers (expert managers + non-expert managers) is 2.11 million won and that of non-managers (experts + workers) is 1.29 million won. The difference of the mean monthly earnings between managers and non-managers is 0.83 million won. Furthermore, those who possess scarce skills and expertise, such as expert managers and expert non-managers, earn much higher monthly income than non-expert managers and workers. The mean of monthly earnings of experts, 2.23 million won, is larger than that of non-experts, earning 1.32 million won. The difference of the mean monthly earnings between experts and non-experts is 0.91 million won. When we compare the effect of authority on income with that of scarce skills and expertise, we can see that the skill dimension is much more important in determining monthly wage of the employees.
Class cleavage reflects not only income inequality but also social inequality. While class mobility is possible, class membership is not randomly achieved by anyone who wants to be a member of a particular class. While the ownership of the means of production or property determines the choice of members of the economy, employer, or employed, educational achievement has been perceived as the most distinct factor affecting one’s economic status. Table 5.4 displays the distribution of class by levels of educational achievement. It reveals that there is a close association between educational achievement and class position in South Korea. This strong association suggests that the large investment in education is a rational choice made by Korean parents in order to provide their children with a better chance to become members of the upper class.
The Korean class system is a highly stratified according to gender, with a strongly patriarchal labor market in which women are concentrated among occupations with low wages and limited possibilities for promotion. Women are not only overrepresented in the less privileged classes, such as the petty bourgeoisie amongst owners, or workers amongst employees, but are also less rewarded than men within the same class. Table 5.5 displays the distribution of monthly wages or income by social class and gender.
There are two points especially worthy of note – the first, that there is an income difference between males and females within classes, and the second, that within each class, the monthly income of women is far lower than that of men. When two exceptional cases are included in the analysis, they significantly changed the analysis results: specifically, these were two female leaders of
insurance sales teams who received extremely high incomes due to the extremely successful sales performance. While they belonged to the lower rungs of the supervisory ladder, they enjoyed an exceptionally high level of income for their class position. The second significant point is that while there are gender differentials within class, systematic class differentials persist within either gender. In each gender, the owner classes have much larger monthly income than non-owner classes. Within the owner classes, the capitalist class has a much larger monthly income than the petty bourgeoisie, i.e., the self- employed. While the average monthly income of the capitalist class is 3,170 won for men and 286.67 for women, the income of petty bourgeoisie is 246.16 won for men and 184.86 won for women. Even the male working class receives a larger monthly income than the female supervisor or female professionals. This strongly supports the assertion that the Korean stratification system is highly structured according to social class and gender.
Gender differences of income within classes indicate that there is also a systematic pattern in determining monthly wages or income with respect to gender. For owners of the means of production, the monthly income difference between men and women becomes smaller with the decrease in number of employees. For employees, the difference in wages between the genders is smaller among those who have authority or scarce skills. The ratio of the mean wage of women to that of men is highest for expert managers and lowest for workers. Working-class women are the mostly underprivileged social group in Korea owing to their working-class membership as well as gender.
In our analysis, class inequality in Korea is salient in terms of economic rewards or returns, but the relative importance of class in determining income has not yet been analyzed. Table 5.6 provides the outcome of regression analysis showing the extent to which class is an important structural variable to determine an individual’s income. Model 1 is a model that comprises individual variables, including education, as human capital. Because the lifetime income profile shows an
inverse U-shape curve, age and squared age are included in Model 1. Both education and age are significant variables that affect an individual’s income. It explains almost 11 percent of the variance of income, which is measured by an adjusted R--square. Comparing the adjusted R- squares of Model 1 with that of Model 2, we observe that Model 2, which adds industrial sectors to Model 1, does not improve much. Controlling for individual variables, those who work in the agricultural sector earn less income than in manufacturing sector by 12.3 percent.
Model 3 indicates that gender is the significant variable in income determination in Korea. Controlling for education, age, and industry, Korean women’s monthly income is almost 45 percent less than that of Korean men. Model 3 displays that the explanatory power of Model 3, 0.210, is also almost twice that of Model 2, remaining low, at 0.112. To identify the net explanatory power of gender, we compared the R-square of Model 4, and Model 4 without the gender variable. The difference of R-squares of Model 4 and Model 3 in Table 5.7 showed an almost 6 percent income variance that can be explained by gender.
Model 4 shows the effect of class on an individual’s income. It indicates that even after we control for education, age, gender, and industry, there are clear-cut class differences in monthly income. Improvement of the explanatory power by Model 4 is 12.9 percent, as shown in Table 5.7, which is the largest variance of income explained by a single variable. Compared with the working class, the class advantage in terms of monthly income is largest for the capitalists and
lowest for the petty bourgeoisie. Class inequality expressed as structural inequality exerts a significant effect on income determination and contributes to the reproduction of economic inequality in general.
This chapter explores economic inequality by social class in Korea using survey data. While the concept of class has been challenged by postmodern theorists, class cleavage still exerts a significant effect on economic life in industrialized countries. This study strongly confirms that class is still the most significant factor generating economic inequality in Korea. While other factors such as gender and education are also significant factors in generating economic inequality, social class plays the most powerful role in shaping economic inequality in Korea.
Korea had been appraised as a case of economic success with a more equitable distribution of wealth than any other industrialized nations. However, economic inequality has become a socially and politically volatile issue after the economic crisis in 1997. Neo-liberal economic reform, guided and enforced by the International Monetary Fund, drastically transformed the labor market and income distribution in the 2000s. Income distribution has continuously deteriorated for the last decade, as confirmed by government statistics and social critics. Indicators of inequality provide fairly consistent trends of worsening distribution of income in Korea.
This study also explores income inequality as an outcome of class relations. By analyzing determinants of income, this study identifies to what extent class locations affect individual income. This study also suggests that class inequality is positional equality and that positional inequality is the most significant source of economic inequality in Korea. We can conclude that social class directly affects income determination and indirectly affects it through education.
Unfortunately, we cannot analyze the trend of economic inequality because of a lack of reliable data that is suitable for the analysis of class inequality. The next step in a broader study of the issue will include an analysis of the trend of class inequality and the effect of the interaction of class and gender on income with time series data. As we observe, the effect of gender on income is also striking and requires more thorough exploration. In addition, we need to analyze wealth inequality among social classes, which plays a much more pertinent role in reproducing class inequality in capitalist societies. Class inequality in Korea can be fully understood when wealth inequality among social classes is fully explored. Surely.
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