Neo-liberal Reform and Bipolarisation of Income in Korea

Abstract

This paper explains the neo-liberal reform measures – foreign direct investment (FDI) policies, financialisation and labour market reform – of the Korean economy following the 1998 economic crisis. It investigates how they have influenced a process identified as the bipolarisation of Korea. Although the increase in FDI inflows has contributed to the economy by overcoming balance of payments difficulties, it has led to increased income inequality. As a result of labour market reforms that targeted labour market flexibility, the number of non-regular/non-standard and part-time workers has increased significantly over the past decade. Labour market reform and financialisation aggravated the bipolarisation.

Key Words:

• Neo-liberal reform
• globalisation
• financialisation
• labour flexibility
• bipolarisation
• Korea

Notes

1 For some brief details on neo-liberal policies, see Lee and Hewison (2010: 182-4) and the various and excellent papers in Robison (2006).

2 Meanwhile, Kang and Kim (2005) noted that foreigners have made only minimal contribution in improving efficiency of the capital market despite huge amounts of FDI inflows.

3 More precisely, the current paper uses the amount of FDI inflows divided by GDP and one-year lag of the measures of inequality to calculate the correlation coefficients.

4 Workers in capital- and technology-intensive sectors show higher marginal productivity of labour than the other sectors; therefore, they are likely to be better paid. Since FIEs tend to be focused on the former, they are likely to pay higher wages to their employees.

5 Korea Development Bank: 42 million won; Korea Export Insurance Corporation: 41 million won; Woori Bank: 38 million won; Citibank and Shinhan Bank: 37 million won; Korea Exchange Bank: 35 million won; Kookmin Bank: 34 million won (this information is from: http://www.paoin.com; http://cafe.naver.com/edujob1, downloaded 27 September 2009).

6 Dispatched workers are defined as those who are paid from company A, but dispatched to another company, company B, temporarily. He/she should work at and be supervised by company B.