42% of South Korean Wealth is Inherited
Kyung Ho Kim, Nov. 24, 2015, 7:46 a.m.
Inheritance accounts for an ever-rising proportion of Koreans' wealth as the opportunities for social mobility dwindle, a study suggests. Kim Nak-nyeon at Dongguk University found that inheritance accounted for 8.2 percent of total national income in 2010, compared to just five percent in 1980. The study shows that more Koreans are becoming richer by inheriting money and other assets from their parents than by earning them through hard work and savings.
The proportion of asset accumulation by inheritance rose from 27 percent in 1980 to 42 percent in 2000. If the size of assets grew by W10 million in a year, W7.3 million was gained by savings in 1980 (US$1=W1,161). But that shrank to W5.8 million in 2000, while W4.2 million was gained through inheritance. The figure is similar to Germany (42.5 percent of asset accumulation from inheritance), but lower than France (47 percent), the U.K. (56.5 percent) and Sweden (47 percent).
The shift is mainly due to the ongoing economic slump compounded by an aging population. In previous periods of rapid economic growth in Korea, there were fewer senior citizens, and sharp rises in GDP led to smaller weighting of inherited assets. Younger Koreans were able to accumulate wealth more easily than they can nowadays. But a rapidly aging society made inheritance more common, while slowed growth led to a decrease in chances for younger Koreans to grow richer.
"If inheritance becomes a more viable route for wealth accumulation than savings, you can't really speak of a meritocratic society," Kim said. Signs are that rags-to-riches success stories are becoming a thing of the past. Out of 1,826 billionaires on this year's Forbes list of the world's richest people, 65 percent were self-made tycoons. But among 30 Koreans on that list, only eight were self-made, falling far short of the global average.