A senior official at the Presidential Office recently argued that "Korea's high interest rates, high inflation, and high exchange rates are an unavoidable cost of success accompanying the Korean economy's leap to a new level, and are not a precursor to crisis but the friction of a leap forward." Before making such arguments, government efforts should come first. The priority should be for the government to prepare policies and measures to resolve the triple-high problem of high inflation, high exchange rates, and high interest rates. Views on the current Korean economy are divided even among experts. Some see it as a boom phase, based on the KOSPI breaking through 8,000 points and a semiconductor export boom. But from the perspective of small and medium-sized enterprises, small business owners, and salaried workers—particularly the 2030 generation—concerns about economic instability run deep. Although dazzling economic indicators abound, the suffering of the 2030 generation is deepening due to the triple-high phenomenon. This is because the harm from the paradox of growth is concentrated on the 2030 generation.
Today's 2030 generation finds it difficult to land jobs even after graduating from college. Employment indicators also show that this generation's employment rate is declining. In particular, jobs at the companies they prefer are shrinking. The economic pressure and sense of deprivation from unemployment are growing ever larger. A labor market centered on non-regular employment leads to falling incomes, while housing cost burdens surge. This is because the prices of apartment jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) and monthly rent are soaring. In particular, the surge in real estate prices is deepening the extreme gap in assets between generations. As a result, it has become difficult for the 2030 generation to narrow the asset gap with older generations. In addition, regulations such as the land transaction permit system and mandatory actual residency requirements, combined with tightening of mortgage loans, have made it difficult to climb the housing ladder. In the past, one could land a job, save for a certain period, take out a loan, and buy a home. But now, high housing costs have reduced disposable income, making the home-buying strategies of the past difficult. The government's fiscal expansion policy has increased the money supply, generating inflationary pressure, among other effects. Korea's broad money supply (M2) is currently surging. An average of about 32 trillion won per month is estimated to have been released. When the money supply increases, the value of money falls. As a result, real estate prices inevitably soar.
The starting point of the triple-high is not the semiconductor export boom or the stock market rally, but rather the high exchange rate. Companies see the won-dollar exchange rate's last line of defense at the 1,500 won level. Yet it is already approaching 1,600 won. There may be various causes, but factors such as the sharp fluctuations in oil prices due to the Middle East war are at work. A high exchange rate inevitably leads to high inflation. Even looking at the consumer price inflation rate announced by the government, it has reached the 3 percent range. Because Korea depends mostly on imports for raw materials such as crude oil, natural gas, and grain, a surge in raw material prices inevitably leads to a high-inflation phenomenon. Of course, the living prices that consumers feel now are likely higher. And the future is even more of a problem. This is because the war between the United States and Iran repeats like a refrain, and oil and gas facilities have suffered considerable damage from Iran's airstrikes on Qatar and elsewhere. The general assessment is that even if the war ends, it will take a considerable amount of time for international crude oil and gas production to recover to previous levels.
High inflation can only be resolved with high interest rates. Recently, the Bank of Korea governor has also been signaling that there is no choice but to raise the base rate. This triple-high adds to the suffering of low-income groups, particularly the 2030 generation. This is because high inflation increases spending on essential goods and housing costs. For borrowers who have taken out loans from financial institutions, the suffering intensifies due to the increased interest burden. If the government finds it difficult to resolve the triple-high phenomenon—stemming from the collapse of the global economy, the Middle East war, and U.S.-China conflict—it should not make the 2030 generation bear the cost of success alone. There is a need to devise measures for the 2030 generation, who will support Korea's future economy. For them, the government must boldly and swiftly step up housing welfare support, including expanding permanent rental housing. It must also comprehensively review and prepare solutions for creating jobs for young people, increasing incomes, reducing housing costs, and resolving asset polarization.
