Close to 40 percent of South Koreans would be classified as financially underprivileged if their income and assets were viewed together as their economic resources, a report released Monday argued.

The report from the Gyeonggi Research Institute (GRI) questioned the conventional way of looking mostly at income to define the middle class, which it said can easily underestimate or overestimate the size of the economic segment. The institute conducted its own study to count household assets in the formula.

GRI was established in 1995 with contributions from the cities and counties of Gyeonggi Province surrounding Seoul and local companies.

GRI set its criteria for the income-based middle class as those within the 50-150 percent range of the median income determined by the Korea Labor Institute. The same range was applied for net assets of households.

Based on statistics from 2013, the middle class would have an annual income of between 10.13 million won (US$8,606) and 30.39 million won. In terms of net wealth, the middle class would have between 37.73 million won and 113.19 million won.

The report said the "true" middle class would need to have an income-assets combined value of between 123.6 million won and 370.9 million won.

Under such a definition, while 55.5 percent would be categorized as the middle class purely in terms of income, only 33.1 percent would qualify in terms of net assets. When the two factors are combined, only 20.4 percent meet the criteria, the report said.

The report found 18.5 percent who were underprivileged on the income scale. It also found another 19.2 percent who by income are in the middle class but are in the underprivileged stratum when it comes to assets. These 37.7 percent, the report said, face high risks of falling out of the middle class at any time when they suddenly find themselves with less income.

"The results suggest that in order to reduce the number of economically underprivileged, government policies are important not only in increasing their income but in helping them secure assets," the report said.

The government, for example, could provide financial benefits matching the savings by the people of the lower class and promote specific types of loans under which low-income homebuyers can get loans with cheap interest and later share profits from increased home prices with the lender.

"In order to allow more savings through higher household income, the government needs to actively promote economic activities by additional members of a family," the report said.

"Tax breaks and employment systems for additional income earners should be in place." (Yonhap)