This paper analyzes the income mobility trend and determinants of income
mobility in Korea using the KLIPS data. The main findings of this paper are
as follows. Firstly, it turns out that income mobility has had a decreasing
trend during 1999-2008 period. Secondly, the ratio of the middle income class
to whole households has decreased while the upper income class and the lower
income class have increased. As a result polarization of income classes and the
demolition of the middle income classes has proceeded simultaneously.
Thirdly, a decrease in income mobility in the long-run will make the
demolition of middle income class and polarization of income distribution.
We examined determinants of income mobility of households in both
directions considering demographic factors, economic factors, and policy
factors. As expected, all three factors have significant effects on income
mobility in Korea. We found that there exists a critical age before which
probability of income mobility increases as age increases and vice versa after
that. In terms of economic factors, the more is the number of family and the
less is the initial income, the more probable is upward income mobility. Also,
the job status such as a regular job and a white color affects income mobility.
In terms of policy variables, we find whether the household head goes through
the OJT(On the Job Training) and receives social insurance also affect the
income mobility.
The policy implications of this paper are as follows. The government needs
to subsidize the OJT program in the private sector. Some social welfare
programs should be revised not to discourage the work incentive of workers.