People often say anything increasing in price is a bubble, be it housing, education, anything really.
I was just watching a video talking about how so many South Koreans go to university, creating a bubble. South Korea is not even the highest level in the world, even though it is one of the highest, with 45% of their population holding a tertiary degree as of 2014. Only 3% higher than the United States. But we don’t see the reduction in population in other countries which are well educated.
I don’t education can be a bubble, because education generally increases the productivity of workers while also providing societal benefits. The problems in South Korea are due not to the existence of wealth, neither are they due to economic inequality, which ranks as one of the most equal countries in the world on this metric.
One metric where South Korea really struggles in in housing prices where the housing price to income ratio in 2024 was 20.7, ranking South Korea as one of the most expensive countries in the world, among other countries like Iran, Vietnam, Taiwan, and Argentina.
The other issue is that people in South Korea work significantly more hours per year than in other developed countries, over 300 hours more per year than the average American. Despite this, South Korea has a lower GDP per capita than many countries which work significantly fewer hours. Hence, their labor productivity is fairly low for an OECD member country. By dividing GDP per capita by average hours of per labor we get the following hourly productivity metrics:
- United States: $32
- Germany: $31
- Japan: $24
- South Korea: $17
The problem of an extremely high cost of living driven by housing costs being out of reach for most people leading to people delaying marriage and having a family. On top of this, South Koreans work far more hours than people in most other developed countries, so they aren’t seeing the fruits of their labor. Their labor productivity is also significantly lower than their OECD peers, which just goes to show that working more hours is not itself enough to make a better life. Productivity in South Korea is very low, probably as a result of an economy dominated by the Chaebols.
When the cost of housing is high and labor productivity is low, no wonder South Koreans are struggling.