South Korea’s low-income households have been hit the hardest by the virus-driven economic fallout, with those in the bottom 20 percent of incomes mostly forced to reduce spending significantly without any increase in income year over year, government data showed Thursday.
According to data released by Statistics Korea, the average monthly income of households in the bottom 20 percent bracket stood at 1.498 million won ($1,218.2) in the January-March period, staying unchanged from the same period a year ago.
On the contrary, incomes of households in the upper brackets all increased over the same period. The bottom 20 to 40 percent bracket saw income rise 0.7 percent, middle 40 to 60 percent bracket 1.5 percent, top 20 to 40 percent bracket 3.7 percent, and top 20 percent bracket 6.3 percent.
The income of households in the bottom 20 percent bracket jumped 6.9 percent in the fourth quarter ended December 2019 versus the previous year thanks to the government’s efforts to boost jobs – mainly public sector jobs – and increase social benefits, but COVID-19 outbreaks disrupted the government’s job creation program.
According to the data, earned income of households in the bottom 20 percent bracket fell 3.3 percent in the first quarter to 513,000 won and property income 52.9 percent to 16,000 won. Their business income, meanwhile, increased 6.9 percent to 257,000 won and transfer income 2.5 percent to 697,000 won. In particular, public transfer income that includes public pension and social benefits jumped 10.3 percent to 511,000 won in the first quarter versus the same period a year ago.
Statistics Korea blamed COVID-19 for the fall in earned income of households in the bottom 20 percent bracket because the virus outbreaks have left many with temporary jobs jobless or reduced pay. The transfer income provided by the government or social benefits helped offset income losses, it added.
An unnamed official from the finance ministry said households in the bottom 20 percent bracket suffered the slowest income growth as many of them held temporary jobs that have been hit the hardest by the virus-driven economic fallout.
This had led those in the bottom 20 percent bracket to drastically cut their household spending. Their spending fell 10.8 percent in the first quarter from a year ago to 1.751 million won. It was the steepest drop since Statistics Korea began compiling related data in 2003. The drop was slower in other brackets – 7.1 percent for the bottom 20 to 40 percent bracket, 9.1 percent for the middle 40-60 percent bracket, 1.0 percent for the top 20-40 percent bracket, and 2.3 percent for the top 20 percent bracket.
Their consumption spending fell 10 percent to 1.486 million won during the same period, the sharpest drop since 2003. Spending on education, in particular, declined 49.8 percent during the cited period. They also spent 46.7 percent less on household goods and services, 36 percent less on clothing and shoes, 10.4 percent less on housing, water supply and heat, and 9.3 percent less on food and accommodation. Welfare spending also fell 10.7 percent.
But their spending on non-alcoholic beverages increased 10.5 percent, alcohol and tobacco 9.2 percent, and mobile 12.1 percent, according to the data.
Non-consumption spending by households in the bottom 20 percent bracket also fell 15.1 percent in the first quarter from a year ago. Their disposable income increased 3.9 percent to 1.234 million won.
Data showed that 53 percent of households in the lower income bracket were in loss, meaning that their consumption spending is bigger than their disposable income.
By Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]