South Korea's Household Debt Crisis and Its Impact on Korean Society

Abstract

South Korea’s household debt crisis was brought to the forefront of the minds of millions of people around the world due to the hugely popular Netflix series Squid Game. In Squid Game, individuals with large amounts of personal debt engage in childhood games like “Red Light, Green Light” but with a macabre twist: they must risk their lives and the lives of others to win a cash prize that could relieve themselves of crushing debt. This paper examines the major economic, financial, and societal factors that contribute to the ever-worsening household debt crisis in South Korea. In the past 25 years, South Korea has endured several major economic and financial crises, notably the 1997 Asian Financial Crisis, the 2017 Global Financial Crisis, and the Covid-19 Pandemic. In particular, the Asian Financial crisis in 1997 brought about significant changes to South Korea’s financial, corporate, and labor sectors, primarily due to reforms imposed by the International Monetary Fund (IMF). Furthermore, run-away housing prices, elevated levels of self-employment, and societal structures and behaviors unique to Korea have exacerbated the household debt crisis. All these factors have contributed to the growth and the continuing trend of extreme household debt that disproportionately impacts South Korea’s youth, self-employed, and part-time workers.