[In-Depth Review] Middle-Class Ideology and Regrets of Owning a Home

Jin Mi-yoon, Research Fellow at Korea Land and Housing Corporation (LH) Land and Housing Research Institute

Since the global financial crisis, many advanced countries have failed to protect the middle class. In Japan, during the eight years of Abenomics, the stock market surged and luxury cars sold rapidly due to massive economic stimulus measures, but wage increases did not improve household finances. The Guardian, which described the British middle class as a parachute class and a dying class, commented that the liquidation of the old middle class is now the new normal, leaving only emerging financial aristocrats. In the United States, once considered the land of opportunity, the middle class, which accounted for over 60%, shrank to 52% in 2019. Wealth concentration also worsened, and in 2020, for the first time in U.S. history, the assets held by the top 1% exceeded the total assets of the entire middle class.

The 20th century was truly the era of the middle class. With rapid growth and improved living standards, the middle class was a kind of normal state. Hard work and effort paid off. However, as economic growth slowed and industrial structures were reorganized, jobs became increasingly unstable. Prices and housing costs soared, but incomes did not increase accordingly. Governments gradually reduced welfare spending, leaving little for the middle class. Now, the middle class struggles not to fall further down, let alone rise, and has sought leverage in ‘investment.’

Today, the identity of the middle class depends more on how well one utilizes financial leverage than on income level, occupation, or homeownership. Hadas Weiss of Humboldt University Berlin says, “In modern capitalist society, we have never truly been middle class; only the ideology that we can be middle class exists.” Here, the ideology refers to ‘investment.’ She points out that there is only the ‘illusion’ that one can become middle class by acquiring a certain level of assets through investment.

After the 1998 Asian financial crisis, Korea massively expanded consumer finance as an economic stimulus measure. Over the past 20 years, personal financial investment has increased, and loan thresholds have significantly lowered, achieving financial democratization. However, side effects are severe. There is a phenomenon of borrowing at low interest rates to focus on investment. In the early 2000s, a new term ‘debt-tech’ emerged beyond ‘financial tech.’ Articles with headlines like “Smart ‘Debt-Tech,’ Burning Stock Market, Let’s Borrow to Get Onboard, You Who Manage Debt Well Will Become Rich” were abundant. As if a d?j? vu, in 2021, terms like ‘debt investment’ and ‘all-in borrowing’ appeared. The number of young retail investors under 30 surged in the stock market, and transactions by the 20s and 30s generation were prominent in the housing market. As housing prices continued to rise, household debt also increased significantly. Borrowing to buy homes and this debt pushing up housing prices has created a vicious cycle.

Today, the decline of the middle class in advanced countries is linked to the decrease in homeownership rates. The burden of housing prices, too high even with borrowing, is pushing more people out of homeownership and into the non-middle class. Isn’t this the same in Korea? The middle class, which was close to 75% in the early 1990s, has now fallen to 50.8%. More middle-class individuals have fallen into poverty than moved into high-income groups. It is difficult to sustain middle-class status without a home, but buying a home is also challenging due to the difficulty of borrowing and repaying debt.

Financial democratization expands life opportunities, and homeownership contributes to housing stability and asset-based welfare. However, as a result of excessive finance and overinvestment in housing, are we not now experiencing severe wealth inequality and conflict? The departure from the middle class is not just a problem of the middle class alone. It is a product of the investment frenzy trapped in the financial snare and the social consequence of pursuing private interests that prioritize the profits of one’s investments over common good. What can we do to protect the middle class? And let us reconsider whether there has ever been a true housing model for the middle class.

Jin Mi-yoon, Research Fellow, Land and Housing Institute, Korea Land and Housing Corporation (LH)

This content was produced with the assistance of AI translation services.