1. Recent economic trends
 
Real GDP rose 0.6% in the second quarter of 2014 from the first quarter and advanced 3.6% year-on-year. In June, the industrial production index bottomed out on an increase in service and a big recovery in mining and manufacturing. In July, exports rose 5.7% year-on-year to USD 48.4 billion on strong exports to developed countries. Imports rose 5.8% to USD 45.9 billion, bringing the trade surplus to USD 2.5 billion. In July, the consumer price index rose only 1.6% year-on-year as a result of substantial declines in prices of agricultural products and oil. Total employment rose by 505 thousand (2.0%) year-on-year to 25 million 979 thousand persons, and most of the new workers were those over 50 years of age in the service industry.
 
2. Corporate retained earnings and their effect on the economy
 
Retained earnings are the portion of corporate net income retained by corporations rather than paid to cover expenses or distributed to shareholders as dividends. Retained earnings soared about 29 times from KRW 26.3 trillion in 1990 to KRW 762.4 trillion in 2012. In the same period, financial assets including cash and cash equivalents, short-term investments, and investment assets increased while tangible assets such as machinery and equipment decreased. More corporate retained earnings, less dividends, and a slowdown in investment resulted in a bigger percentage of corporate profit and a smaller percentage of personal or household profit in national income. The higher retained earnings have naturally made companies more financially sound, but they were not a source of revenue to increase the growth potential of companies or the economy.
 
3. Household and corporate income in Korea and global comparison
 
The gap in income between households and companies, as previously indicated, has widened since the financial crisis, with the result that the percentage of households in GNI is falling while that of companies is rising. The gap has worsened because relatively little business income has been directed to households, the self-employed have been unable to make sound profits, and the net interest income gap between households and companies has grown. The relative income gap between households and companies was more pronounced in Korea than in other OECD countries because of the considerable slowdown in the growth of self-employed income and the wide net interest income gap between households and companies.


4. Working hours

    Korea is second only to Mexico among OECD member countries in average annual working hours per person, which totaled 2,163 hours in 2013. In Korea, the culture of long working hours reduces labor costs for companies and enables employees to earn more income. Most jobs are dominated by males, who are the primary income earners in most households. One of the government's four strategies in the "Roadmap to achieve 70% employment rate" is the establishment of a family-friendly work environment, which entails shortening and allowing much greater flexibility in working hours. However, employees and companies are in great disagreement as to how working hours should be reduced. This strategy will not be feasible until the two sides effectively reconcile their differences.