hankyoreh

(Clip Art Korea)

Average monthly income for South Korean households showed its first decline in four years during the second quarter of this year.

With the lowest-earning 80% of households experiencing a drop in income amid the baseline effect from the payment of disaster relief funds to all South Korean citizens in Q2 2020, only the top-earning 20% of households enjoyed income growth.

Statistics Korea published findings from its survey of household trends during Q2 2021 on Thursday. The results showed monthly income per household averaging 4,287,000 won (US$3,635) for that quarter, down 0.7% (28,000 won) from a year before.

Amid a mild recovery in economic conditions, increases were observed in all three areas of earned, business, and asset income, but public transfer income also fell sharply.

It was the first negative trend in the 16 quarters since the second quarter of 2017, when average monthly income fell by 0.5% (19,000 won).

At the same time, the household trend survey for Q1 2021 marked the first time Statistics Korea expanded the scope of its announced figures from its previous standard of “non-farming, forestry, or fishing households of two or more people” to include single-person households and farming, forestry, or fishing households.

The government said the figures were misleading, noting that public transfer income increased by fully 113.7% in Q2 2020 compared with the year before due to the payment of disaster relief funds to all South Korean citizens.

“The increase in public transfer income was unusually large due to the channeling of large amounts of policy support during the second quarter of last year, including disaster relief payments to all South Koreans,” the Ministry of Economy and Finance (MOEF) said.

“While public transfer income may have fallen from the year before [during Q2 2021], it remains high compared with its pre-COVID levels as support continues to be provided to segments that have suffered losses due to the pandemic,” it added.

The problem is that polarization has only intensified in the year and a half since the start of the pandemic’s spread.

With the drop in public transfer income, the lowest-earning 80% of households experienced a collective drop in income during Q2 2021. In contrast, average monthly income actually grew by 1.4% from a year earlier for the top-earning 20% of households, reaching 9,241,000 won (US$7,836).

While public transfer income also fell for the top-earning 20%, the impact was relatively minor since it only accounted for a small portion of their total income. Meanwhile, rises were observed not just for earned income (4.8%), business income (1.3%), and asset income (127.7%), but also for non-current income (16.4%).

For the lowest-earning 20%, average monthly income was 966,000 won, down 6.3% from a year ago. It was the largest drop since Q2 2018 when it fell by 16.7%.

The lowest-earning 20% of households saw a decline in total income as public transfer income dropped by 22.5%, despite market income increasing due to improved business conditions — including rises of 19.6% in earned income and 16.1% in business income.

The quintile share ratio for equivalized disposable income, which provides a sense of the extent of income inequality, stood at 5.59. It was up by 0.56 multiple points from 2Q 2020, indicating deteriorating conditions.

The quintile share ratio is calculated by dividing average income for the top-earning 20% (fifth quintile) by that of the bottom-earning 20% (first quintile). A larger ratio indicates a bigger income disparity.

The MOEF said, “Given that the period under comparison during the second quarter of last year was heavily impacted by COVID-19, we need to take into account the changes in indicators not only in comparison with the same quarter in 2020, but also the second quarter of 2019 before the pandemic hit.”

While the situation was worse than in Q2 2020, it was also improved in comparison with the 5.74 ratio calculated for Q2 2019.

By Lee Ji-hye, staff reporter

Please direct comments or questions to [english@hani.co.kr]