Change in Industrial Structure and Growing Inequality in Korea

Abstract

□ 한국의 소득분배구조 악화의 근본적 원인을 탐색 ○ 소득분배구조를 초래한 다양한 원인들 가운데 산업구조 측면의 변화의 기여분에 대한 진단 ○ 노동시장의 변화는 물론, 외부적 경제환경 변화의 효과와 구분 □ 분배구조 개선을 위한 각 정책 영역별 과제 설정의 근거 제공 ○ 산업정책, 고용정책 등 시장소득의 불평등 악화 방지를 위한 정책과 소득재분배를 통한 불평등 완화 정책 등 각 정책의 역할, 가능성, 한계 등을 분석

It is widely accepted that income inequality of Korea has worsened since the economic crisis of 1997 and the main driver of this deterioration lies in the change of labor market. But when we attend to more long term trend, we can find that the income inequality started to get worse since early 1990's. In this research we tried to find to what degree the increasing income inequality has to do with change in industrial structure in Korea, especially from 1992 to 1997. After summing up the general figure of industrial change, we analysed the effect of change in industrial structure to income distribution, from the view point of income disparity among classes as well as labor-capital income share. With regard to the added value, the share of manufacturing industry of Korea is one of the highest in OECD countries. But employment share of manufacture of Korea is just a average level of OECD countries. This means that there exists large gap in labor productivity between manufacture and service area, and also implies that deindustrialization has been going on with increasing income inequality in Korea. To find the effect of industrial change to functional income distribution more correctly, we assume that labor income share in self-employed sector is equal to that of corporation sector. It turned out to that the change in industrial structure as well as employment structure affected to decreasing labor income share for decades. By means of inequality index(MLD) decomposition and regression model we also tried to find the influence of industrial change on householders labor income inequality. Thought industrial factor by itself was not main driver of worsening income distribution, it is found to play more important role before 1997 crisis. Considering the long-term and underlying influence of industrial change on income inequality, it should be closely examined what effects industrial policy measures will make. It should be kept in mind that promoting employment in service sector could have negative effect on income inequality in the presence of continuing disparity in labor productivity between manufacture and service area.