This study delves into significant discrepancies between the objective and subjective middle classes in Korea, potentially prompting a diverse range of grievances from different economic groups in middle-class discourse. It emphasizes the necessity of examining the multi-layered nature of the so-called "subjective middle class" and its impact on the discourse, together with the causes of such discrepancies and the various challenges that may arise. The study employs an independent survey to gauge Koreans' class perceptions through two web-based panel surveys. The first survey, conducted in May 2023, queries participants on their objective income and asset levels, subjective class affiliation, satisfaction with living standards and prospects for upward mobility, perceptions of income distribution and inequality, and views on socioeconomic policies. It aims to analyze whether a systematic downward bias exists in self-assessment of one's position in income distribution, patterns of bias and their causes, and potential distortions such bias can cause in policy attitudes. The subsequent survey, conducted in September 2023, incorporates an experimental component to observe the effects of information on social perception and policy attitudes. It identifies participants' objective class positions using data from the first survey and then shares this information with them. By randomly assigning participants to two groups and providing exact class standings on income distribution to only one group, this study enables an empirical analysis of differences in attitudes toward various social policies, including middle-class awareness and support for redistribution policies, between the feedback-receiving group (treatment group) and the group without feedback (non-treatment group). The empirical analysis in this research draws from these surveys, with Chapters 2 and 3 based on the first survey (N=3,434) and Chapters 4 and 5 on the second (N=2,000). This report is organized as follows. Chapter 1 presents the necessity and direction of middle-class research, focusing on the concept of the middle class and discussions surrounding the middle-class crisis. Chapter 2 reviews previous studies on objective-subjective class inconsistency, conducts international comparisons using available data, and explores the determinants of subjective class consciousness among Koreans. Chapter 3 compares perceptions of class inequality and policy attitudes on various issues by reclassifying the category of the "socio-economic class" in consideration of the multi-layered nature of the middle class in Korea. Chapter 4 examines the changes after correcting perception biases through objective class information based on the experimentally designed results of the second survey. Chapter 5 assesses the varied cognitive structures and policy preferences within the multi-layered structure of the Korean middle class and examines whether this may lead to policy distortion in the context of discussions on the privileged middle class or elite hereditary succession. Finally, Chapter 6 summarizes the findings and discusses their implications.

Over the past two decades, Asian societies saw abrupt changes in their political, social, and economic spheres. Rapid and sustained economic growth lifted hundreds of millions of people out of poverty. Well over half of Asia’s residents are now middle class and Asia is the engine of economic growth across the globe. This tremendous growth and its impact, however, are by no means uniform. The extent and type of change varied within and between countries, and many populations did not reap the same benefits as others. Significant pockets of poverty still exist throughout the region. In fact, two-thirds of the world’s poor live in Asia. Recent data suggest that more than 800,000,000 Asians exist on less than USD 1.25 a day and 1,700,000,000 live on less than USD 2 (Kuroda, 2013). Life in Asia is especially challenging for populations living in the margins of everexpanding mega-cities, isolated rural areas, areas affected by conflict, and groups that are marginalized and excluded due to biased government systems and services or social prejudices.

This study aims to define the concept of the social service, which newly emerged in the mid-2000s in order to create jobs in social work and improve social welfare. And it also suggests policy agendas after reviewing the current status and problems of the social welfare service, which is considered as the most important one of social services. The growing importance of social services for the improvement of social welfare is largely attributable to rapid social and economic changes such as low birth rate, population aging, the rising labor participation of female workers and the growing number of nuclear family. Reflecting such changes, social services will serve as a social safety net minimizing blind spots in the system. This is of great significance for the current welfare system and the significance is expected to grow further. In this study, the social service can be defined as the personal service that have a large consumption externality and require public provision. This definition broadly includes most services stipulated in the Social Enterprise Promotion Act and social policy projects with distinctive social welfare characteristics, while it narrowly covers social welfare and public health services and also in the narrowest sense refers to the care-based social welfare services. In 2007, the size of Korea’s social services accounts for 0.46% of GDP in the narrowest sense. Korea’s social welfare service is, at present, provided by two subsidizing methods of direct subsidy to service providing agencies and subsidy to users through a voucher system. The coexistence of the two produced some problems, which may be understood as a transition process. As a result, users are faced with confusion and inconvenience in using welfare services. And the coexistence has produced problems such as selecting eligible users not in a reasonable way, deepening separation between private and public sectors, and lack of responsibility in service providing agencies. In particular, as for the provider- dependent services, it is the providing agency that handles qualification screening, planning and service provision, which causes problems such as dual provision of similar services, degraded quality of service, overlapping service from local and central governments and the lack of supervision. The study suggests necessary agendas as follows. First, it is necessary to expand social service provision. This does not mean unconditional expansion, but it means placing a priority on social services that are particularly deficient and care about the livelihood of users and also gradually expanding social services to the middle class. Second, it is necessary to increase the provision of social welfare service through a voucher system. To that end, this study suggests two possible methods: one is to commission the provision of provider- dependent services to existing voucher agencies and the other is to integrate nationally providable services-among services which have been transferred to local governments-into a service managed by the central government. In this way the degree of respective benefits given to individuals will be comprehensively understood, thereby making social service provision more efficient while avoiding overlaps. Third, it is necessary to establish a supervisory system that manages the quality of social services, which has not been properly monitored and show considerable differences among regions. Therefore, a care standard should be prepared as an independent supervisory agency which evaluates the quality of services and maintain services complying with the least requirements. Fourth, it is necessary to develop a mechanism for the management of workers who provide social services. In order to guarantee safety?assured social services for those in need, it is important to set up a training management system which aims to systematically train workers newly entering this area and continuously monitor them. Fifth, it is necessary to establish an integrated delivery system of social welfare services. Efforts are needed to strengthen the connectivity between welfare areas and other public services. And this should be accompanied by the consideration of local characteristics. In this process, the government’s integrated social welfare management system, dubbed “Happy-e-eum,” may be useful.

Gyeongjoon Yoo, Fellow, KDI Dae-il Kim, Professor of Economics, Seoul National University □ Purpose of Study The purpose of this study was to offer a comprehensive analysis of the changing trends of the Korean income structure after the Financial Crisis and to view such changes from various perspectives as well as to understand their causes. □ Changing Trends of Income Inequality Korea's income inequality (Gini Coefficient), according to the "Report on Income and Expenditure Trends of Urban Salary and Wage Earners' Households (RIE)" by the National Statistical Office (NSO), which was 0.284, 0.291, and 0.283, respectively during the years of 1995-1997, rose to 0.316, 0.320, and 0.317, respectively during the years of 1998-2000, and further rose to 0.319 in 2001. However, the Annual Survey does not include the unemployed, self-employed and single-person households. Therefore, we used the statistics that include these factors as found in the "National Survey of Household Income and Expenditure (NSIE)," a five-year interval survey by NSO, and computed corresponding Gini Coefficient with the following results:- For 2000, Gini Coefficient of salary and wage earners' households, as in the NSIE criterion, was 0.293 only, somewhat lower than 0.317 using the RIE criterion. However, the coefficient for entire households including self-employed, unemployed and single-person households came out to a rather high value of 0.389. Changing Trends of Gini Coefficient 1995 2000 All Households Excluding Single Person Households All Households Excluding Single Person Households All Households 0.332 0.300 0.389 0.353 Salary & Wage Earners' Households 0.287 0.266 0.313 0.293 Non-S&WE HH Total 0.395 0.349 0.472 0.425 Self-Emp 0.314 0.303 0.396 0.387 Unemp 0.466 0.405 0.473 0.417 S&WE & Self-Employed 0.301 0.283 0.345 0.329 S&WE & Unemployed 0.328 0.290 0.377 0.332 Source: The "National Survey of Household Income and Expenditure," NSO; computed from yearly statistics. - Also, the Gini Coefficient for 1995 and 2000 using the RIE criterion was 0.284 and 0.317, respectively, while using the NSIE criterion yielded 0.332 and 0.389 respectively for the same years. This indicates that the increase in income inequality between the pre- and post-crisis periods as computed using the NSIE criterion was higher than that using the other criterion (RIE). □ Changing Trends in Income Classes As for the 'collapse of the middle class' often cited after the Financial Crisis, Table 2 shows that 1) the middle class began its decline from the pre-crisis period, 2) continued to decrease till 1999, but showed a modest increase in 2000, then decreased again in 2001. This pattern denotes a declining trend of the middle class but we cannot affirm that this trend implies to the 'collapse' of the middle class.- However, the 'Upper-middle Class (70-150% of median income)' are shrinking in size as does the income of the middle class and this phenomenon is usually accompanied by an increase of the 'High Income Class,' the possibility of polarization of income distribution may be in progress. Distribution of Relative Income Classes 1994 1995 1996 1997 1998 1999 2000 2001 High Income Class 21.0 22.1 22.8 21.8 22.9 23.3 22.0 22.7 Middle Class Total 70.2 69.0 67.5 68.5 65.4 64.7 66.1 65.3 Upper-middle Class 55.0 54.8 53.6 54.8 51.6 50.6 51.7 50.5 Lower-middle Class 15.2 14.1 13.9 13.7 13.8 14.1 14.5 14.7 Low Income Class 8.8 8.9 9.7 9.7 11.7 11.9 11.9 12.0 Note: We classified income classes in accordance with the OECD criteria (1995), so that those with income level above 150% of the median income was classified as High Income Class, below 50% as Low Income Class, and the middle class was divided into two sub-classes; Upper-middle Class with 70-150% of median income and Lower-middle Class with 50-70% of median income. Source: Computed from original data contained in NSO's " Report on Income and Expenditure Trends of Urban Salary and Wage Earners' Households (RIE) " On the other hand, the proportion of Low Income Class at first showed an increasing trend after the Financial Crisis, but has been static since 2000. - Also, the proportion of Lower-middle Class (with an income of 50-70% of median value) shows a similar increasing pattern as the Low Income Class.- Furthermore, the size of Low Income Class, which has been stable since 2000, seems to validate the income redistribution effects from the expanded social safety net measures such as the "National Basic Livelihood Security Act," which has been implemented since October 2000. □ Measuring the Effect of Income Redistribution Policy We estimated the effect of income redistribution policy on the economy in terms of equality improvement and labor supply fluctuation from the viewpoint of general equilibrium theory. The effect of transfer payments on income equality improvement has in fact improved the Gini Coefficient by approximately 1.6 percent. However, this measure could possibly reduce the labor supply of the applicable class.- These results were obtained from a simulation exercise using limited samples and therefore, are not a direct estimation of redistribution policy using the actual data.- The results show that the decrease in labor supply under the hypothesized redistribution policy was concentrated in the Low Income Class which is the beneficiary class because 1) it is the main target of income redistribution policy 2) it has a high proportion of female participants in economic activities, and 3) in general, the female's wage elasticity is estimated to be much higher than that of males.- This result indicates that a greater-than-expected budget amount might be required to implement the income redistribution policy in reality. That is, the Low Income Class could respond by elastically reducing their labor supply as they receive government subsidy, which is an income support benefit under the income redistribution policy. - Therefore, proper 'work-promoting incentives' must be suggested as a prerequisite for income redistribution policy.