Economic Pain Index Worsens for 3rd Year, but Inflation Continues to Rise

The Index of Economic Hardship for Ordinary People Also Rises for the Third Consecutive Year as of September

Customers are shopping at a large supermarket in Seoul.

[Asia Economy Reporter Jang Sehee] As inflation soars, the "economic pain index," which sums the inflation rate and unemployment rate, recorded 5.2 in September. This marks the third consecutive year of increase as of September. This is due to inflation exceeding 2%.

According to calculations based on Statistics Korea data by Choo Kyung-ho, a member of the National Assembly's Planning and Finance Committee from the People Power Party, the economic pain index last month was 5.2. It has been rising for three consecutive years, from 2.7 in September 2019 to 4.6 in 2020.

Recently, the economic pain index rose sharply along with a significant increase in inflation. While the unemployment rate was 2.7%, lower than 3.6% in the same month last year, inflation for September rose continuously from -0.4% in 2019 to 1.0% in 2020, and then to 2.5% in 2021.

The economic pain index (unemployment rate + inflation rate) is an indicator that reflects the economic difficulties felt by the public. When unemployment rises due to job shortages or inflation increases making wallets thinner, the economic pain index rises.

Economic Pain Index for Ordinary Citizens Rises for 3 Consecutive Years... Inflation Expected to Rise Further in October

The economic pain index for ordinary citizens, which sums the expanded unemployment rate (Employment Assistance Indicator 3) and the living cost index inflation rate, was 15.1 in September, 0.7 higher than 14.4 in the same month last year. The expanded unemployment rate was 12.0%, and the living cost index change rate was 3.1%. The economic pain index for ordinary citizens also rose from 9.9 in 2019 to 14.4 in 2020, and surged further this year.

As inflation, which has already risen significantly, increases the burden on ordinary citizens' economy, inflationary pressures may grow further due to ongoing supply bottlenecks and the effects of With Corona (gradual return to normal life). On the 27th, the Bank of Korea stated in its report "Review of Major Inflation Drivers in Korea and the U.S." that "we must be cautious about the possibility that the high inflation trend may last longer than expected due to the domestic impact of global supply bottlenecks and increased demand following the restructuring of the quarantine system."

If supply chain bottlenecks persist, consumer prices will also be affected. Professor Andonghyun of Seoul National University’s Department of Economics said, "If production costs rise, the final consumer prices will inevitably increase. From a business perspective, companies have no choice but to pass on some of the inflation to consumers."

Meanwhile, consumer prices are expected to rise in the 3% range this month. On the 26th, Kim Woong, director of the Bank of Korea’s Research Department, said at a seminar titled "Review of Recent Major Issues in Our Economy," "We cannot rule out the possibility that the consumer price inflation rate will exceed 3% in October," adding, "Last year's mobile communication fee support effect will raise consumer prices by 0.7 percentage points."