`Growth No Solution for Poverty’

from The Korea Times

By Yoon Ja-young


Economic growth is not a cure-all for poverty, a report by a government-run think tank showed, giving policy implications for the incoming administration of President-elect Lee Myung-bak, who has emphasized economic growth.

``History shows that economic growth is a necessity to solve poverty, not a sufficiency,'' said Choi Kyung-soo, senior research fellow at Korea Development Institute (KDI), in a report.

``Economic growth should either have a strong engine or be labor-intensive to solve poverty,'' Choi said.

Korea has seen the poverty rate grow since the mid 1990s, mainly due to the decrease of jobs in the manufacturing sector, according to the economist.

The analysis showed the average real wage of the bottom 20 percent recorded 1.2 million won in 2005, only 1,000 won more than a decade ago. The real wage of the middle class, meanwhile, stood at 2.47 million won, recording an annual 1.6 percent growth on average, indicating the poorest households have not recovered since the Asian financial crisis.

He said low-income households, who lost jobs in the manufacturing sector due to the international division of labor, are not successfully switching to other sectors.

Choi said the discrepancy between growth and distribution after the Asian financial crisis is increasing the need for social cohesion. ``Developed countries have been emphasizing social cohesion as a condition for sustainable growth since the 1990s. Social cohesion is linked with poverty reduction.''