[M Changing the World]⑪ From 'Yeongkkeul' to 'Jjantech'... Entrenchment of the Low Growth Era

[M Generation's Future World]
1 in 2 M Generation Members Predict Decline of Korean Economy
Weaker in Assets, Income, and Debt Compared to Older Generations
High Inflation and Interest Rates Fuel Thrifty Finance Trend

The millennial generation (born 1980?1996, M generation), boasting the best qualifications since the era of Dangun, faces a bleak reality today. As the low-growth trend continues, not only have the quality jobs desired by the M generation decreased, but soaring loan interest rates have also increased the debt repayment burden on young 'Yeongkkeuljok' (people who have borrowed to the limit, even to the point of their soul). Consequently, there are complaints that individual efforts alone cannot overcome the wealth gap.

Moreover, severe low birth rates and aging are another crisis confronting the M generation. These demographic changes, along with a decline in the working-age population, worsen the potential for economic growth. The international credit rating agency Moody's has forecast that South Korea's potential growth rate will slow to about 2% after 2025.

As a result, the M generation holds a negative outlook on the Korean economy. According to a panel survey conducted by Asia Economy through the polling agency Embrain from the 31st of last month to the 5th, targeting 1,000 adults aged 20?69 nationwide, 48.5% of the M generation expressed a negative view when asked about the 'future outlook of the Korean economy.' Among M generation respondents, 35% predicted 'continuous decline,' and 13.5% said it would 'decline rapidly.' In other words, one in two M generation members foresee a regression of the economy.

This contrasts with responses from older generations. The 86 generation (born 1960?1969) most frequently answered that the Korean economy would 'continue to grow and develop (33.5%).' The X generation (born 1970?1979) predicted 'no significant change (37.2%).'

A generation poorer than their parents... The old saying 'A dragon rises from a small stream' is no longer true

The reason the M generation is particularly pessimistic about the economic situation is related to the environment in which they have lived. The M generation has taken a distinctly different path from their parents' generation, the 86 generation.

Unlike the past when food was scarce, the M generation experienced a relatively affluent childhood and fully enjoyed the benefits of the digital revolution. Their educational attainment is also high. According to the 'OECD Education Indicators' released by the Ministry of Education in 2021, the tertiary education attainment rate of Korean adults (aged 25?64) in 2020 was 50.7%, higher than the OECD average. Especially among young adults (aged 25?34), the rate was 69.8%, ranking first among OECD countries.

Despite being the smartest generation ever, paradoxically, employment has become more difficult. Many young people have given up job hunting due to ongoing employment difficulties. Furthermore, even if they manage to enter a company, unlike their parents' generation, it has become harder to accumulate assets.

When the 86 generation were new workers, there was a so-called 'Jaehyeong Savings,' a 'worker asset formation savings' product. This was a tax-exempt product created by the government in April 1976 to help workers build assets. In 1979, a commercial bank offered a Jaehyeong Savings product with an annual interest rate as high as 33.1%. At a time when financial products were not diverse, Jaehyeong Savings was called the 'first bankbook for new employees' and helped young workers accumulate a lump sum. Although it was abolished in 1995 due to lack of funding and revived in 2013, it never regained its former glory due to low returns and long payment periods.

In the past, simply depositing money in a bank yielded decent returns, so the older generation valued 'diligence and sincerity.' They lived with the hope that working hard anywhere would allow them to rise like a dragon from a small stream. However, for the M generation, the saying 'a dragon rises from a small stream' has long been outdated. In a situation with no proper opportunities to increase assets, the perception that lifelong effort cannot overcome inherited wealth has become widespread.

This is confirmed by statistics. The M generation identified 'family background (47.3%)' as the most significant factor influencing individual economic success. This was followed by ▲individual ability (34.7%) ▲occupation (14.4%) ▲educational background (2.7%). The M generation was the only group to rank 'family background' as the top factor. Other generations (86 generation, X generation, Z generation) all answered that 'individual ability' had the greatest influence. Ultimately, the so-called 'spoon class theory,' which claims that parental wealth is essential for success, has firmly taken root among the M generation.

Income has also not increased significantly compared to older generations. According to the Bank of Korea's report 'Status and Characteristics of the MZ Generation,' in 2018, the labor income of the MZ generation was 1.4 times higher than that of the same age group in 2000. However, this increase was smaller than that of the X generation (about 1.5 times). On the other hand, total debt for the MZ generation was 4.3 times that of the same age group in 2000, far exceeding the X generation's 2.4 times.

Some define the current young generation as 'the first generation poorer than their parents.' In reality, as the younger generation shows vulnerability in assets, income, and debt compared to previous generations, this expression has been somewhat proven.

Reckless investment... Why they fell into Yeongkkeul and debt investing

Consequently, young people have begun turning to stocks and virtual assets as means of asset accumulation. Since it is difficult to build assets solely through labor income, they have chosen risky assets as a breakthrough for the future.

Especially during the COVID-19 pandemic, when real estate prices soared, an investment boom occurred among the M generation. The M generation also cited 'COVID-19 and the real estate surge (69.8%)' as the 'most influential economic event.' The Z generation (born 1997?2009), immediately following the M generation, selected the same option at 83.3%. In contrast, the 86 generation and X generation most frequently chose the 'International Monetary Fund (IMF) foreign exchange crisis,' at 55.8% and 46.5%, respectively.

Following COVID-19, the era of ultra-low interest rates and soaring housing prices led to the proliferation of new terms such as 'Yeongkkeul' (borrowing to the limit for investment), 'debt investing,' and 'panic buying.'

This reflects the aggressive and proactive investment tendencies of the M generation. Unlike the older generation, which valued saving as a virtue, the M generation is characterized by a willingness to take some risks for returns.

The M generation is also the most positive about 'Yeongkkeul.' When asked about their opinion on borrowing to the limit for investment, 10.8% of the M generation (1.2% very favorable, 9.6% favorable) responded positively. The M generation was the only group with a preference rate exceeding 10%.

The problem is that recent interest rate hikes have increased the interest burden on young people. According to data submitted by the Bank of Korea to Yang Kyung-sook, a member of the National Assembly's Planning and Finance Committee from the Democratic Party, the loan balance for those under 30 at the end of last year was estimated at 514.5 trillion won, combining bank loans (354.8 trillion won) and secondary financial institutions (159.7 trillion won). This is a 27.4% increase compared to 404 trillion won at the end of 2019, before the pandemic.

In particular, those under 30 had an average loan of 54.136 million won from secondary financial institutions, a 32% increase from 41.01 million won at the end of 2019. The higher average loan amount per person in secondary financial institutions, which have relatively higher interest rates than banks, indicates that their interest repayment burden is growing.

Young people try to repay debts through labor income, but this is not easy. Due to the economic downturn, employment has decreased, making it difficult to find jobs.

From 'Jjantech' to 'Geojibang'... Increasing young 'Jalringo-bi'

Following the scars left by 'Yeongkkeul' and 'debt investing,' high inflation has led the M generation to tighten their belts. Until a few years ago, conspicuous consumption such as 'YOLO' and 'FLEX' was popular, but now a craze for 'Jjantech'?saving money by reducing unnecessary consumption and spending only on essentials?is sweeping through.

Especially, 'Geojibang,' where people share saving tips, has emerged as a new trend centered on the M generation. Originating mainly from KakaoTalk open chat rooms, each 'Geojibang' has different operating rules. Usually, participants set daily or monthly budgets and record their spending in the chat room.

Participants send sharp reprimands if someone is judged to have overspent. For example, when one participant said, 'I want to go to a coin karaoke,' a witty reply came back: 'Karaoke costs money. Just hum a tune.'

The 'No-spending Challenge' is similar in nature to 'Geojibang.' This challenge aims for zero spending in a day, pursuing extreme frugality. Participants bring lunch boxes instead of buying lunch at work and drink instant coffee in the pantry instead of going to cafes after meals. They even post proof of zero spending days on social media.

For the M generation, 'Geojibang' and the 'No-spending Challenge' are a kind of play culture. Rather than being discouraged by high inflation, they try to overcome the situation together through 'saving play.'

Professor Eunhee Lee of Inha University's Department of Consumer Studies said, "Until a few years ago, many young people focused on the present rather than the future, engaging in conspicuous consumption like 'FLEX.' However, as prices and interest rates continue to rise amid uncertain economic conditions, more young people are focusing on the future." The worsening economic situation, including high inflation, high interest rates, and recession, has increased the number of people preparing for the future.

Professor Lee also said, "The M generation tends to humorously cope with difficult situations. The current popularity of 'Geojibang' and the 'No-spending Challenge' provides comfort by sharing empathy through social media." She added, "This trend is expected to continue."