Income Mobility Drops to 17.6% in 2022

According to the latest report from Statistics Korea, only 17.6% of respondents managed to move into a higher income quintile in 2022 compared to the previous year. This marks a decline from the 18-18.2% range observed from 2018 to 2020, indicating a growing rigidity in income mobility.

Workers at a construction site (SBS capture)

The comprehensive analysis, the first of its kind by Statistics Korea, aimed to assess the dynamism of social mobility by combining income data from the National Tax Service to create a panel database of 11 million samples. The findings show that income mobility, including those who fell into a lower income quintile, was 34.9% in 2022. Conversely, 65.1% of respondents saw no change in their income quintile, a 0.9 percentage point increase from 2018's 64.2%.

A closer look at the data reveals that 69.1% of individuals in the bottom 20% income bracket in 2022 remained in the same quintile as the previous year, higher than the overall maintenance rate of 65.1%. Only 0.5% of those in the bottom 20% in 2021 managed to move up to the top 20% in 2022, highlighting the significant challenge of upward mobility for the lowest earners. In contrast, 86% of those in the top 20% maintained their income quintile.

The long-term perspective shows that 31.3% of the bottom 20% income earners in 2017 remained in the bottom quintile until 2022, while 63.1% of the top 20% income earners stayed in the same quintile over the same period. This data underscores the persistence of income inequality and the difficulty of breaking out of one's economic bracket.

Academics attribute these trends to income polarization driven by the dual structure of the labor market. The top 20% income bracket predominantly includes individuals with stable, high-paying jobs, such as regular employees of large companies, public institution workers, and high-ranking public officials. The rigidity of the labor market, particularly for older workers, further exacerbates this issue.

The survey also highlighted age-related disparities in income mobility. Young people (aged 15-39) had the highest income mobility rate at 41%, with an upward mobility rate of 23% compared to a downward mobility rate of 18%. Middle-aged individuals (aged 40-64) had a mobility rate of 32.2%, while those aged 65 and older had the lowest rate at 25.7%, with a significantly lower upward mobility rate (10%) compared to the downward mobility rate (15.7%).

The Korea Development Institute (KDI) has previously commented on the rigidity of regular employee wages and the excessive seniority-based wage structure, which they argue reduces the demand for middle-aged employment by companies. KDI has called for the expansion of job-based pay systems and the flexibilization of regular employment to address these issues.

The findings from Statistics Korea suggest that the ladder of social mobility is breaking, with less than 20% of the population experiencing an increase in their income quintile. This trend poses significant challenges for social cohesion and economic growth, as the gap between the rich and the poor continues to widen. The data underscores the need for policy interventions to enhance income mobility and address the structural issues within the labor market.