South Korea's per capita gross national income (GNI) is poised to surpass $40,000 for the first time this year. According to the Bank of Korea, nominal GNI in the first half of the year increased by 21.8% compared to the same period last year. The bank believes that if there are no unexpected shocks in the second half and the exchange rate remains stable, achieving the $40,000 milestone is likely.
This is a significant development. After exceeding $30,000 in per capita GNI in 2014, South Korea is set to reach a new income level after 12 years. As of last year, only five countries— the United States, Germany, the United Kingdom, France, and Italy—had populations exceeding 50 million and per capita GNI above $40,000. If South Korea achieves this milestone this year, the number of countries meeting this criterion will increase to six.
South Korea's economic model differs from that of small, wealthy nations that rely on resources or finance, where a small population enjoys high incomes. With a population of over 50 million, South Korea has built its manufacturing and export competitiveness in sectors like semiconductors, automobiles, and shipbuilding. It is a commendable achievement for a country that started from the ruins of war to stand shoulder to shoulder with major developed nations.
However, the $40,000 figure should not be overestimated. The significant increase in national income this year is largely due to a semiconductor boom, rising export prices, and stable exchange rates. While nominal GDP in the second quarter rose by 26.4% year-on-year, the real GDP growth rate, adjusted for price changes, was only 3.7%. This indicates that the productive capacity of our economy has not grown by more than 20% in a year.
Per capita GNI, expressed in dollars, is sensitive to exchange rates. When the value of the won rises, the dollar-equivalent of the same won income increases, and when the won depreciates, it decreases. Japan also surpassed $40,000 in the past but fell back to the $30,000 range due to stagnation and yen depreciation. Similarly, if semiconductor prices drop or the exchange rate spikes, it will be difficult for South Korea to maintain a stable $40,000.
Most importantly, per capita GNI is an average value calculated by dividing the total income of businesses, government, and households by the population. Even if companies earn substantial profits from semiconductor exports, if the sales of small businesses and wages for workers do not increase, the public's perception of their economic situation will not change. Considering the burdens of housing, education, healthcare, and loan interest, there can be a significant gap between average income statistics and actual living standards.
The roles of the government and businesses are clear. They must channel the income generated from the semiconductor boom into research and development, facility investment, and quality job creation. The achievements of large corporations should lead to increased productivity and wages for their partner companies, and productivity in the lagging service sector must also be improved. It is also crucial to lower costs for housing, education, and childcare to enable better living standards with the same income.
Achieving a per capita GNI of $40,000 is a valuable milestone for the South Korean economy. However, it should not be a fleeting number that can be easily lost due to changes in exchange rates and semiconductor prices. The prosperity of export companies must be connected to a virtuous cycle of investment, job creation, wages, and domestic consumption. The challenge now for the government and businesses is to move beyond merely surpassing the $40,000 mark and create a sustainable $40,000 era that the public can truly feel in their lives.
* This article has been translated by AI.
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