[Il-ho Yoo’s Economic Walk] Is Generational Conflict an Economic Problem?

[Financial News, October 12, 2023] Il-ho Yoo (PERI Research Fellow/ Public Finance)

[Il-ho Yoo’s Economic Walk] Is Generational Conflict an Economic Problem?

There are many challenges that a society faces in any country, and Korea is no exception. Political, social, and economic “conflicts” are probably the biggest problems we face. A talk I heard a few days ago was also about this, but the speaker’s interpretation was unique. He was specifically referring to generational conflict, and unlike other countries, he was looking for the root cause of our generational conflict in the success of compressed growth.

As we know, the political and social views of young people in their 20s and 30s, middle-aged people in their 40s and 50s, and older people in their 60s and beyond are quite different. This is often attributed to differences in education, but I think it’s a mistake to attribute it to the economic fluctuations of compressed growth. According to this, people in their 60s and older have experienced a period of high growth from the poorest countries to middle-income countries, and they have a sense of contributing to that development to some extent. Those in their 40s and 50s, on the other hand, were mostly born or spent their school years outside of absolute poverty, lived through a period of high growth and a desire for improved distribution that could be seen as a reaction to high growth, and lived through the 1997 crisis as a member of the family (but not as the head of the household). Meanwhile, those in their 20s and 30s were born during the most prosperous times, living a life of freedom and not having to be afraid to go anywhere in the world.

This historical background explains the different opinions and perceptions of each generation. And it’s easy to see that these changes are the result of 60 years of (highly) compressed growth, which is unprecedented in world history.

Regardless of its source, this conflict needs to be resolved. Frustratingly, the solution doesn’t come easily. It’s often said that we should try to understand each other and talk a lot, but this principled argument is often met with a realistic rebuttal: how long will it take? However, I believe that this seemingly frustrating approach is the only way forward.

Not long ago, the opposition party’s chairman of the innovation committee made a statement that young people, who will be living more in the future, should have more decision-making power, which caused a lot of backlash, but this kind of logic that one side should have more power than the other is not a solution. Even back then, I can recall the counterargument that the older generations, who are currently contributing more (taxes, etc.), should have more power.

As we have already pointed out, it is essential to have a dialog based on mutual understanding to narrow down differences, which requires a proper understanding of the past and present situation. Here’s an example. There is often a gloomy view that today’s younger generations (including those in their 40s) will be worse off than the generations before them. There is also a view that the further down the generations you go, the more competition you face. On the other hand, there are also complaints about the younger generation that the older generation has endured all sorts of hardships and achieved so much national achievement, but they are not grateful for it. Both sides are partly right and partly wrong, but these disagreements have not led to creative solutions on how to solve the problem.

For the sake of dialogue, there should be an effort to bridge the gap between perceptions, even if it’s a slow process. It is evident that the older generations have reached this point through hard work in much less favorable conditions.

This does not mean that we should be complacent with our current situation, and it does not imply there is no need for us to make any effort. Countries and societies can only progress if they cooperate with each other. One contrete action that the older generation can do to expand opportunities for the younger generation is to create more new jobs.

October 12, 2023

<Il-ho Yoo, PERI Research Fellow> Former Deputy Prime Minister for Economic Affairs and Minister of Strategy and Finance