November 19, 2005

Trade Deficit Hangs In a Delicate Imbalance

In contrast with the United States, where the personal savings rate recently has sunk into negative territory -- with people spending more than their income -- South Korea's personal savings rate is about 7 percent, and its national savings rate of 33 percent ranks among the highest in the world. The rate reflects the thrift not only of individuals but also of government and business; the South Korean government has run budget surpluses in recent years, so it need not borrow large sums as the U.S. government must.

In interviews with HJC workers, the least thrifty among them reported saving 10 percent of income, and the most thrifty put saving at 60 percent. Typical was the response of Kim Tae-young, an HJC engineer, who said: "My wife just gave birth to twins. I used to save 50 percent, but the cost of the children is very high, so now I'm down to 20 percent."

Miller has sunk much of his wealth into shopping centers and other real estate, so he does not have to fret about saving. But the lack of thrift characteristic of Americans is evident among his employees. In interviews, several reported saving well under 10 percent of their incomes, and even putting aside that much is difficult, they said. Few put the maximum allowable amount in the company's 401(k) savings plan, according to Chief Financial Officer Randy Hutchings, and a substantial number do not contribute at all.

"I would venture to say that of my 125 employees, 80 percent live paycheck to paycheck, and maybe even before paycheck to paycheck," Miller said. "There are employees I've had, when they earned $50,000, they owed money; when they earned $100,000, they owed money. It's not what they earn; it's just the way they do things."

Small wonder, given such saving and spending patterns, that the global trade imbalance continues to burgeon.

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