DEVELOPMENT BULLETIN-SOUTH KOREA: Fallen middle class may hinder economic recovery

By IPS Correspondents Reprint | | Print |

Ahn Mi-Young

SEOUL, May 16 1998 (IPS) - Just a year ago, many of its members had more than what they needed, and were looking forward to reaping yet more rewards for their hard work.

Instead, South Korea’s middle class fell on hard times in the wake of the prolonged financial crisis, and now some political and economic analysts worry that the woes of the once moderately affluent may hinder the country’s bid for an early recovery.

“The middle class is the backbone of a nation’s domestic market,” says Han Sang-Choon, who leads the international finance team at Daewoo Economic Research Institute. “Their (fall) could exacerbate the trouble by further dampening domestic spending, subsequently prolonging the recession.”

Senior journalist Song Hi-Young, for his part, echoes the sentiments of some people in saying that “this is a season of fury.”

While the middle class is in deep pain, he says, politicians seem to be more concerned with “haggling over power”. And he warns that the increasing frustrations of the ex-upwardly mobile may just lead to an explosive situation.

South Korea, in fact, was among the last Asian countries to be affected by a regional currency slide that began last July. By November, however, the won had undergone substantial devaluation and the economy was in deep trouble.

So far, the middle class – defined by the Daewoo researchers as those who earned the equivalent of 258,000 dollars a year and spent some 1,500 dollars monthly — has been the hardest hit.

Many had apparently occupied redundant positions, and had managed to hold onto them only because of the general corporate practice of lifetime employment.

But when the economy took a wild tailspin late last year, legions of salarymen wound up jobless. The country’s unemployment rate climbed to 6.5 percent in March, up from end-1997 figure of three percent.

These days, social workers report that the rising number of homeless people includes former white-collar workers. At the same time, police officials say that in the past months, there has been a 38 percent jump in what they call “hungry crime”, or theft of food, appliance and clothes by the newly unemployed.

But social workers are most concerned about the effect of the downfall of the middle class on families. Some have noted a disturbing pattern among families in which the father loses his job, and the mother leaves. The father then takes the children to a shelter while he looks for work, or takes a job in a far-away place.

In the Ja-An Children’s Home in the southern industrial city of Ulsan are some 20 children left there by newly unemployed parents.