I finished working at the factory and started busing more than a decade ago. However, I was astonished that the bus driver's wages were relatively low compared to the difficulty of work. At the time, I thought that while the ideological and North Korean issues that I was engrossed in were important, it was South Korea that was festering inward. And using my knowledge of reading several economics English textbooks, I resent the unrealistic reality and expressed income-led growth. In fact, it was a practical proposal. At the time, the government of President Moon Jae In implemented income-led growth, which was later evaluated as a policy failure of President Moon Jae In's real estate policies and income-led growth.
Over the years, when I thought carefully about it, the original income-led growth policy was a reasonable policy, but it was linked to the real estate problem, and to be precise, the income-led growth policy was ineffective in conjunction with the values of citizens who belittled the legitimate work I repeatedly stated in the future. In discussing with artificial intelligence, artificial intelligence used newspaper articles as data at the time to argue that the income-led growth policy failed and was separate from the real estate problem. However, as I put forward the logic that these two policies were closely linked and created negative synergies, AI also lists data accordingly. Yes, AI is not political. It's just a tool.
And I always try to talk about hopeful policies for the future while writing a column, which I think is a time when even failed policies have new values.
As an example of the failure effect of the income-led growth policy, the collapse of self-employed people is often highlighted, and if the policy had been successful, the income would have created demand and enriched the self-employed. However, the transfer of income to real estate, the COVID-19 crisis, and the increasingly accelerating onlineization have not helped the self-employed. In particular, the problem of the income-led growth policy is pointed out by focusing only on the increased wages of employees paid by self-employed people, which does not seem reasonable.
The mechanisms of income and demand are easily understood when linked to the development of artificial intelligence or robots these days. If artificial intelligence or robots take away everyone's jobs, production will be excessive, but demand from people without jobs will not be created. Eventually, they will not need artificial intelligence or robots. That's why it was said to give basic income by receiving the robot tax. Producers and consumers actively move organically with each other and coexist organically.
From Income-Led Growth to Balanced Regional Development: A Connected Timeline of Failure and Opportunity in Korea
Introduction: Why These Four Episodes Must Be Read as One
At first glance, Korea's economic policy history over the past decade looks like four unrelated stories: income-led growth (2017–2022), the real estate and household debt crisis (2019–2022), the relocation of Fourth Industrial Revolution industries to the provinces (2025–), and the still-unfinished project of balanced national development. In fact, these four episodes form a single thread across time. Each policy left behind an unresolved problem that became the precondition for the next, which in turn generated a further problem. This essay traces that chain in chronological order, evaluates the strengths and weaknesses of each stage, and proposes a direction for future policy.
Stage 1 (2017–2019): Income-Led Growth — A Designed Virtuous Cycle That Ran Aground
The Policy Design
The Moon Jae-in government raised the minimum wage sharply (16.4% in 2018, 10.9% in 2019), shortened working hours, and expanded welfare spending, designing a virtuous cycle: "wage increase → higher disposable income → expanded consumption → increased revenue for self-employed businesses → greater capacity of employers to pay higher wages."
What Actually Happened
An empirical analysis by Seoul National University economists Lee Jeong-min and Kim Dae-il found that the job growth rate fell by -3.8% in 2018 compared with 2017, with the minimum wage hike accounting for roughly 1 percentage point of that decline.
In March 2018, the unemployment rate hit its highest level in 19 years for that month; the Korea Development Institute (KDI) itself acknowledged in a report that the minimum wage hike, among other factors, contributed to this outcome.
In a 2019 survey of 100 economists, only 1% gave the government's economic policy an A grade, and 94% of respondents supported either scrapping or slowing down income-led growth.
Why the Virtuous Cycle Broke (the Central Finding of This Analysis)
The middle link in the chain — expanded consumption — was cut off by a separate channel: real estate and household debt. Rather than flowing into consumption, the additional income was absorbed by loan repayments and housing purchases, leaving self-employed business owners bearing higher labor costs without receiving the compensating revenue increase the policy assumed.
Assessment
Strengths: The underlying goal of improving income distribution was legitimate, and it was theoretically connected to the wage-led growth literature discussed internationally by institutions such as UNCTAD and the ILO.
Weaknesses: The policy relied excessively on a single instrument — the minimum wage — without adequately testing whether the assumed consumption-transmission channel would actually function, particularly given Korea's unusually high share of self-employment.
Stage 2 (2019–2022): Real Estate and Household Debt — The Asset Market That Swallowed Income
What Happened
Household debt rose from roughly 1,300 trillion won (2017) to roughly 1,850 trillion won (2022), reaching 103.8% of GDP.
Housing market overheating began in the second half of 2019 and accelerated sharply during the pandemic-era near-zero interest rate period of 2020–2021 (Korea's policy rate fell to 0.5%).
The 2020–2021 housing boom was not unique to Korea; the United States, Sweden, Denmark, Canada, Germany, and the United Kingdom, among others, experienced a similar asset boom driven by globally synchronized ultra-low interest rates. However, the Bank of Korea's own analysis found that 71% of Korea's housing price variation was attributable to domestic factors — a notably higher share than in countries like the UK, where global liquidity played the dominant role.
A Bank of Korea report found that the buildup of household debt and debt-service burden has structurally suppressed private consumption, a pattern of "reversal" that stood out among the countries surveyed as uniquely pronounced in Korea.
Self-employed debt swelled to roughly 19% of total household debt, as business owners increasingly relied on borrowing to survive rather than on a recovery in sales.
Policy Response and Its Limits
The Moon government made housing price stabilization its top economic priority and issued more than 20 policy packages during its term, yet the result was a sharp rise in jeonse (long-term deposit lease) prices and an outright housing price surge — the opposite of the intended effect. Critics point out that the response leaned heavily on tax measures (such as a strengthened comprehensive real estate tax) while paying comparatively less attention to the more fundamental drivers: ultra-low interest rates, excess liquidity, and insufficient housing supply.
Assessment
Strengths: The government recognized the severity of the problem early and devoted more policy energy to this area than to almost any other.
Weaknesses: Over-reliance on tax policy, poorly coordinated with monetary and supply-side policy, ultimately produced a failure serious enough to become a central factor in the subsequent change of government — an outcome the ruling party itself later publicly acknowledged as a policy it needed to "reflect on."
The Trap Completes Itself
At this stage, a broad class of households emerged that held assets but suffered from cash-flow poverty — the so-called "house poor." A vivid illustration discussed in this analysis: a resident of an expensive apartment complex who, in order to keep up with mortgage payments, worked cleaning jobs across several buildings while owning only a single suit of clothes.
Stage 3 (2013–2025): The Concentration of Jobs in the Seoul Metropolitan Area — A Second Lock on the Trap
This stage overlapped in time with Stages 1 and 2, but its effects have become most visible in recent years.
The Data
Between 2013 and 2023, nearly half of the nation's total increase in employed persons was concentrated in new towns within the Seoul metropolitan area; 12 of the top 20 municipalities for job growth were in the metropolitan area.
The metropolitan area's share of national population surpassed the non-metropolitan share for the first time in 2020, reaching 50.2%.
The number-one reason young people cite for moving into the metropolitan area is "employment." Over the past decade, roughly 670,000 young people have net-migrated into the metropolitan area.
About 56% of all newly founded companies are concentrated in the metropolitan area, with IT firms even more heavily skewed toward Seoul.
Why This Matters
Combined with the real estate problem from Stage 2, this stage blocked the commonsense solution of "sell the house and move to a cheaper city." Relocating to reduce one's asset burden meant losing one's income altogether — a dilemma in which jobs and real estate came to hold each other hostage.
The Failure of Past Attempts: Innovation Cities
The public-institution relocation and "innovation city" (hyeoksin dosi) policy pursued since the Roh Moo-hyun administration was a direct attempt to solve exactly this problem. However:
Relocated jobs were concentrated mainly in the support functions of public institutions, and KDI's own evaluation found no meaningful growth in knowledge-based industry employment — the kind needed for sustainable regional development.
Many innovation cities, such as Gimcheon, experienced a "ghost town" phenomenon, in which relocated employees returned to their families in Seoul every weekend, preventing a resident population from truly taking root.
Industry-university-research clusters failed to form except in a handful of cases.
Assessment
Strengths: The underlying direction — balanced national development — was correct, and public-institution relocation did produce some degree of dispersal.
Weaknesses: The policy failed to simultaneously satisfy three necessary conditions — the quality of relocated jobs (support functions versus core R&D or headquarters functions), spousal employment, and residential quality of life (education, healthcare, culture) — and so produced only a temporary, shallow effect.
Stage 4 (2025–2026): Relocating Fourth Industrial Revolution Industries to the Provinces — A Different Set of Conditions
Recent Developments
In June 2026, the Lee Jae-myung government announced its "Korea's Great Leap Forward: Three Mega-Projects," under which Samsung Electronics and SK hynix agreed to invest roughly 800 trillion won in a memory semiconductor cluster (four fabrication plants) in the Jeolla-Gwangju region. Candidate sites under discussion — including the 6.32-million-pyeong renewable-energy self-sufficient city of Solaseado in Haenam and the Gwangju airport site — are chosen primarily for large land area, massive power supply (gigawatt-scale), and ultra-pure water, conditions that are largely independent of the networking and talent-pool effects that concentrate white-collar industries in the capital region. Naver's data center in Chuncheon follows the same logic: an industry whose core requirements are power, cooling, and land does not need to be located near Seoul.
The Fundamental Difference From the Innovation City Era
The innovation-city era: Relocated industries were white-collar knowledge industries (public-institution office work) that were inherently difficult to move away from the capital region because of network and talent-pool effects.
The current Fourth Industrial Revolution relocation: Relocated industries are capital- and energy-intensive advanced manufacturing (semiconductor fabs, data centers) — industries with inherently higher locational freedom.
The Recurring Challenge
Jeollanam-do province has already formally requested that the central government commit to building a new city of one million residents, citing the need to "improve residential quality of life." Experts have noted that "locking in" high-caliber talent in the region will require new international schools, elite high schools, and cultural infrastructure — precisely the same failure point that undermined the innovation cities. The one difference this time is that the government and companies appear to be addressing residential quality of life from the outset, as part of an integrated package with the industrial complex and new city plans, rather than as an afterthought.
Assessment (Necessarily Provisional, as the Process Is Still Underway)
Strengths: The policy accurately identifies a genuine shift in industrial locational requirements, and it addresses the residential-quality-of-life problem earlier and more explicitly than the innovation city policy did.
Potential Risks: The semiconductor industry carries significant cyclicality and oversupply risk, and bottlenecks in labor and construction resources are a concern. If a single large factory ("point investment") fails to translate into a diversified regional economy, the project risks repeating the innovation cities' shortcomings.
Summary of the Connected Structure
Recommendations for Future Policy
1. Integrate Income Policy With Asset Policy
Wage and welfare policy must always be designed with household debt and the housing market explicitly in view. Whether additional disposable income flows into consumption or is absorbed by debt repayment depends heavily on prevailing household debt levels and interest rates at the time. With Korea's household-debt-to-GDP ratio already well past the internationally recognized warning threshold of 80%, this analysis shows that wage increases alone cannot be expected to stimulate consumption.
2. Design Housing Policy as a Triangle of Monetary, Supply, and Tax Measures — Not Tax Measures Alone
The central failure of the Moon government's housing policy was its reliance on a single instrument: taxation. Future policy should treat interest-rate and liquidity management, supply expansion, and taxation as a single integrated package, while also acknowledging — at the goal-setting stage — that domestic policy alone cannot fully control outcomes during periods of globally synchronized low interest rates.
3. Select Industries for Regional Relocation Based on Locational Freedom
Rather than attempting to disperse every industry to the provinces, policy should prioritize industries — such as semiconductors, data centers, and energy-intensive manufacturing — that are not inherently dependent on capital-region network effects. This is the clearest way to avoid repeating the innovation cities' trial and error.
4. Design for "Relocating a Way of Life," Not Just "Relocating Jobs"
Residential quality of life — education, healthcare, culture, and spousal employment — must be planned simultaneously with, not after, the industrial complex itself. Without international schools, elite high schools, dual-income employment linkage programs, and cultural infrastructure built in from the start, the risk of a repeat "ghost town" phenomenon remains high.
5. Diversify Regional Industrial Clusters
Relocation policy should not stop at attracting a single large corporate factory ("point investment"); it must actively cultivate a surrounding ecosystem of suppliers, research institutions, and startups so that the region's income base broadens. Only once this is achieved can the "local consumption cycle" that income-led growth originally assumed actually begin to function within the regions themselves.
Conclusion
The failure of income-led growth, the real estate surge, the concentration of jobs in the capital region, and the relocation of Fourth Industrial Revolution industries to the provinces are not separate events. They are the same underlying structure appearing in different guises over time. A policy meant to raise income was absorbed by the asset market; the attempt to escape that asset-market trap was frustrated by a lack of regional jobs; and the current attempt to solve that job shortage is once again running into the old unsolved problem of residential quality of life. Breaking this cycle will require treating income, assets, employment, and residential quality of life not as separate policy domains to be designed one at a time, but as a single system to be designed together. That is the clearest lesson of the past decade.
References
Sung, T., & Park, S. (2019). Issues, analysis, and evaluation of the income-led growth policy: Focused on the wage-led growth debate. Journal of Korean Economic Analysis, 25(2), 53–88. [성태윤·박성준, "소득주도성장 정책 쟁점과 분석 및 평가"]
Kim, T. (2018). An evaluation of income-led growth and future directions. Korean Social Policy Review, 25(3), 175–208. [김태일, "소득주도 성장의 평가와 향후 방향"]
Jung, J. (2022). Causes and effects of the surge in apartment sale prices during the Moon Jae-in administration. Economy and Society, 135, 70–117. [정준호, "문재인 정부 시기 아파트매매가격 급등의 원인과 효과"]
Korea Development Institute (KDI). (2021). Effects and policy directions of public institution relocation to the provinces [공공기관 지방이전의 효과 및 정책방향]. KDI Research Report.
Korea Development Institute (KDI) Economic Information and Education Center. Current status and implications of sluggish private consumption [민간소비 부진현황과 시사점].
Bank of Korea. (2025). The effect of housing-driven household debt accumulation on consumption [부동산발 가계부채 누증이 소비에 미치는 영향].
Lee, J., & Kim, D. (2019). Empirical analysis of 2018 employment indicators [2018년 고용지표 실증분석]. Presented at the 2019 Joint Conference of Korean Economic Associations.
Ministry of Land, Infrastructure and Transport. (2022). We will steadily pursue balanced development policy including additional public institution relocation [공공기관 추가이전 등 균형발전 정책을 차질없이 추진하겠습니다], press explanatory material.
Korea Institute for Industrial Economics and Trade. (2022). Innovation cities: Performance and future tasks [혁신도시 성과와 향후 과제].
Korea Employment Information Service. (2025). Regional labor market polarization and job policy tasks [지역 노동시장 양극화와 일자리 정책과제].
Maeil Business Newspaper. (2019, May 6). Survey of 100 economists on economic policy evaluation.
Wikipedia (Korean). "Income-led growth theory" [소득주도성장론]. https://ko.wikipedia.org/wiki/소득주도성장론
Namu Wiki. "Income-led growth theory" [소득주도 성장론]. https://namu.wiki/w/소득주도성장론
Namu Wiki. "Moon Jae-in administration / Evaluation / Economy / Real estate policy" [문재인 정부/평가/경제/부동산 정책]. https://namu.wiki/w/문재인정부/평가/경제/부동산정책
Namu Wiki. "Real estate surge" [부동산 폭등]. https://namu.wiki/w/부동산폭등
Namu Wiki. "Republic of Korea / Debt / Household debt" [대한민국/부채/가계부채]. https://namu.wiki/w/대한민국/부채/가계부채
Namu Wiki. "Innovation cities / Evaluation" [혁신도시/평가]. https://namu.wiki/w/혁신도시/평가
Korea Policy Briefing. (2019). "Income-led growth" [소득주도성장]. https://www.korea.kr
Korea Enterprises Federation (formerly FKI). "Survey of self-employed business owners on minimum wage." https://www.fki.or.kr
Financial News. (2026, June 23). "One in three self-employed business owners: 'I don't even earn the minimum wage'" [자영업자 3명 중 1명 "최저임금도 못 번다"].
Financial News. (2026, June 29). "Three candidate sites for the Honam semiconductor investment plan" [호남 반도체 투자계획 유력 후보지 3곳은].
Financial News. (2026, June 29). "The road to success for the 'Honam Semiconductor Silk Road'" ['호남 반도체 실크로드' 성공으로 가는 길].
Pressian. (2023, August 30). "The Moon Jae-in government tried to tame real estate with taxes, and failed" [문재인 정부, 세금으로 부동산 잡으려다 실패했다].
Pressian. (2026, June 30). "Is relocating as many public institutions as possible really the best approach?" [공공기관 지방이전, 최대한 많이 하는 것이 최선일까].
Newstapa. "The Moon Jae-in government's housing price surge — the first of its kind since the founding of the nation?" [문재인 정부 집값 폭등, 건국이래 처음?]. https://newstapa.org
EBN News Center. (2025, November 30). "Consumption weakens amid surging household debt — Korea alone bucks the trend" [가계부채 폭증에 민간소비 위축…한국만 유일한 '역행'].
Hankyung (Korea Economic Daily). (2021, June 14). "Private debt grew by 1,000 trillion won over four years of the Moon government" [문재인 정부 4년, 민간 빚 1000조 늘었다].
People's Solidarity for Participatory Democracy (PSPD), Center for Economic and Financial Justice. (2023, July 27). "[The household debt crisis ①] The state looks away, leaving everyone to solve it with loans" [위기의 가계부채 ①].
Gyeongbuk Top News. (2025, August 23). "Regional innovation cities increasingly stagnant despite balanced-development goals — is there any way to prevent ghost towns?"
Seoul Shinmun. (2025, September 17). "The metropolitan area, a 'youth black hole' — 30 years of population imbalance remain unbroken."
Kyunghyang Shinmun. (2025, May 9). "Nearly half of the past decade's job growth concentrated in metropolitan new towns — 'regional job polarization is driving youth outmigration.'"
Hanshin University Newspaper. (2025). "Young people leaving the provinces: 'We don't want to leave, but...'"
National Assembly Library, National Strategy Portal. "Interregional migration patterns and response strategies in an era of population decline."
MBC News. (2026, June). "The 'Honam semiconductor cluster' gains momentum — President Lee meets Samsung's Lee Jae-yong."
Hankook Ilbo. (2026, June 27). "President Lee rebuts concerns about water shortages for the Honam semiconductor investment."
Global Economic (Segye Ilbo affiliate). (2026, June 27). "President Lee: 'No water shortage for Honam semiconductors' — directly rebutting the industrial water controversy."
Daum News/KBS. (2026, June 29). "President Lee Jae-myung: 'Balanced development and semiconductor hub demand align.'"
Daum News. (2026, May 27). "The Jeonnam semiconductor investment comes into view — government support is now needed."
