The younger generation, entrusted with shaping the future of South Korea, is currently ensnared in the grip of poverty. According to surveys conducted by entities such as Statistics Korea, 40% of Korean youth find themselves in the category of impoverished individuals, with incomes falling below 50% of the median. The reduction in job opportunities due to employment cuts has left the youth deprived, and the widening wealth gap has further robbed them of fair competition opportunities. Unlike child and elderly poverty, youth poverty tends to be wrongly attributed to individual issues. It is crucial now to recognize that youth poverty is not merely an individual concern but a societal problem that needs acknowledgment in order to rekindle the flames of South Korea’s future growth. ChosunBiz has examined the challenging lives of these diminishing youth, exploring potential alternatives to reignite their aspirations. [Editor’s Note]
“I thought it would be tough to make ends meet without a strong education or specific skills, especially with my current income. While I’ve stayed away from anything illegal, the idea of earning a good amount of money was appealing.” Kim Gi-seong (pseudonym, 34) works at a logistics company, earning about 2 million won monthly. However, he spends around 1 million won per month on living expenses, including rent, utilities, and food. The rest of his salary goes towards repaying loan interest. Kim’s financial troubles began with stories he heard while working at a cryptocurrency company three years ago, where investors reportedly made significant amounts of money quickly. Intrigued, Kim borrowed 27 million won through a combination of revolving credit and a high-interest-rate credit card loan. Unfortunately, the money didn’t last long.
The once-trendy practices of ‘soul-gathering loans’ and ‘investment through borrowing’ are now impacting the younger generation. Recognizing the potential to become ‘overnight millionaires’ through real estate and cryptocurrency during the low-interest era, these individuals actively pursued investments to avoid the risk of financial setbacks. However, the results were grim. With interest rates rising and asset values falling, the youth now face with the highest debt levels among previous generations, managing both principal and interest payments.
According to the Financial Supervisory Service, the combined lending from the top five domestic banks and six major securities firms to individuals in their 20s and 30s approached nearly 134 trillion won from June 2022 to July 2023. During this period, the younger demographic borrowed approximately 75.46 trillion won through mortgage loans and 8.49 trillion won through credit loans. The scale of margin transactions reached 46.09 trillion won. Securities firms lent 3.77 trillion won to these young adults but did not receive it back.
Many young individuals turn to additional loans to settle their debts. As of the end of 2022, around 1.42 million people under 30 had multiple debts, totaling 157 trillion won. The number of individuals with debts from three or more financial institutions increased by 65,000 in the same year.
While those with high credit scores could secure bank loans, those lacking collateral or credit often turned to loan sharks, resulting in eventual bankruptcy. Credit Counseling & Recovery Service reported a record high of 4,654 cases of principal reduction due to workouts for those under 20 in the first half of 2023, more than double compared to 2018. Young individuals with a history of workouts face challenges obtaining loans from financial institutions due to resulting lower credit scores.
Young individuals teetering on the brink become prey for criminals engaged in loan sharking. Exploiting the urgency of financial needs, these criminals demand photos and contact information of acquaintances for ‘authentication processes.’ In the event of delayed repayment, they resort to threats, including distributing manipulated and explicit photos of the individuals to their friends and family. Some even demand nude photos as collateral for lending money. Adding to societal concerns, crimes targeting teenagers in need of immediate cash are also on the rise.
Experts suggest that strengthening the social safety net is crucial to addressing youth poverty. Moon You-jin, representing the Welfare State Youth Network (WSYN), said, “Youth poverty today isn’t just about young people not trying hard enough; it’s more about broader societal issues like income inequality and rising asset values.” Moon emphasized the importance of gradually expanding unemployment safety nets and social security systems, proposing the creation of a national framework to ease the financial and housing challenges for young individuals.”
