South Korea's economy has entered a phase of "complex polarization," characterized by simultaneous increases in both asset and income inequality. This trend is rapidly weakening the economic status of young people and those without homes, raising concerns that it could diminish productivity and consumer spending, ultimately harming growth potential.
According to a report released by the Bank of Korea on June 11, titled "BOK Issue Note: The Reality and Impact of Household Polarization in Our Economy," the Gini coefficient for net assets rose from 0.584 in 2017 to 0.625 in 2025, marking the highest level since the relevant statistics began in 2012. A Gini coefficient closer to 1 indicates greater inequality.
The Bank of Korea identified rising real estate prices as a primary cause of the widening asset gap. The surge in housing prices during the COVID-19 pandemic significantly increased the disparity between those who own property and those who do not, while also institutionalizing intergenerational asset inequality, as property ownership is largely concentrated among older individuals.
Notably, the number of young people classified as "HENRY" (High Earners, Not Rich Yet) is increasing rapidly. The proportion of high-asset, high-income individuals aged 20 to 34 fell from about 27% in 2017 to approximately 20% in 2025. Even those earning middle to upper-middle incomes are finding it increasingly difficult to ascend to the upper asset tiers, indicating a weakening of the asset formation ladder.
Income inequality is also widening again. After showing improvement due to government redistribution policies, the income Gini coefficient experienced a slight uptick in 2024, and market income, excluding policy effects, deteriorated even further. While wages in the IT sector surged due to performance-based bonuses, wage growth in other industries has remained limited, solidifying a "K-shaped" recovery.
The spread of artificial intelligence (AI) is seen as a potential exacerbating factor for income polarization. Wage disparities, which previously manifested mainly between regular and irregular employment, are now becoming more pronounced across different industries. Additionally, a Bank of Korea survey indicated that individuals in lower income brackets perceive a higher likelihood of their jobs being replaced by AI.
The economic costs of this complex polarization are significant. The Bank of Korea's analysis of a panel of 120 countries found that a 1 percentage point increase in the asset share of the top 10% leads to a 0.16% decrease in total factor productivity. In South Korea, the share of net assets held by the top 10% rose rapidly from 43.0% in 2022 to 46.1% in 2025. This asset structure, heavily reliant on real estate, combined with an aging population, contributes to a phenomenon known as "asset lock-in," further exacerbating productivity declines.
The negative impact on domestic consumption is also evident. The proportion of housing expenses for individuals in their 20s and 30s is rising quickly, and the burden of saving for homeownership is reducing discretionary spending capacity. In contrast, older individuals, who have seen their asset values increase due to real estate ownership, struggle to increase consumption due to lower incomes. This trend is reflected in the rising share of young people in the lowest income bracket, which increased from 7.9% in 2020 to 15.2% in 2025.
The Bank of Korea believes that existing redistribution policies focused solely on income support are insufficient to address these issues. It calls for policies that diversify asset formation pathways for young people and those without homes, such as investments in the stock market. Furthermore, it emphasizes the need for bold investments in key non-IT industries like shipbuilding, defense, and nuclear power, as well as revitalizing the ecosystem of core industries like semiconductors to ensure that the benefits of growth are distributed throughout the economy.
A Bank of Korea official stated, "Our IT sector has a high proportion of imported goods, so even if it grows, a significant portion of the revenue flows out. It is crucial to build a domestic ecosystem. Additionally, industries like shipbuilding, defense, and nuclear power require substantial initial fixed investments, so government policy funding should play a catalytic role."
* This article has been translated by AI.
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