Both Income and Asset Gaps Widen
Net Asset Gap Reaches a Record 68 Times
It has been found that the living conditions of low-income households in South Korea became even more strained last year. As earned income among the lowest income group declined for the first time in five years and the high exchange rate put upward pressure on overall prices, concerns are mounting that the financial burden on vulnerable groups could increase significantly.
According to data released by the National Statistical Portal (KOSIS) of the National Data Office on December 7, the average earned income of households in the bottom 20% income bracket (first quintile) was 4.01 million won last year, down 1.3% from the previous year. This is the first time since 2019 that earned income among low-income households has recorded negative growth. The main factors cited are the continued economic slowdown and the deterioration of the employment environment, particularly for temporary and daily workers.
In contrast, the earned income of households in the top 20% (fifth quintile) reached 120.06 million won, up 3.7%, continuing its upward trend. Although the rate of increase has slowed somewhat, the income gap between the top and bottom quintiles has once again widened to about 30 times.
Income Increased for Both Top and Bottom Quintiles, but the Gap Has Widened Further
The income trend among the lower-income group shows even more pronounced vulnerability. Earned income in the first quintile fell sharply between 2018 and 2019, rebounded during the COVID-19 period due to government support and labor market recovery, but declined again last year. In contrast, earned income among the upper-income group has increased every year since 2017 without exception.
The polarization trend has also persisted in total income, which combines all sources such as earned, business, property, and transfer income. The income growth rate of the top 20% was 4.4%, the only group to exceed the overall average of 3.4%. Income for the bottom 20% also increased by 3.1%, but this was largely due to the expansion of public transfer income such as pensions and subsidies. In other words, there is a growing reliance on transfer income without improvement in earned income.
Net Asset Gap at 68 Times-Largest Since 2012
The asset gap is even more severe. As of March this year, the average assets of households in the top 20% stood at 1.33651 billion won, while those in the bottom 20% had 159.13 million won, a gap of about 8.4 times.
The gap widens dramatically when measured by net assets, excluding liabilities. The average net assets of the top 20% reached 1.77615 billion won, compared to just 25.88 million won for the bottom 20%, resulting in a gap of 68.6 times. This is the largest since related statistics began to be compiled in 2012.
40% of Spending by Lower-Income Households Is Essential Expenditure... High Exchange Rate Hits Hard
The pressure on low-income households is already becoming a reality when looking at their everyday consumption patterns. In the third quarter of this year, households in the bottom 20% spent about 40% of their consumption expenditure on essentials such as food, housing, and electricity and gas bills-twice the proportion spent by the top 20%.
Additionally, the recent surge in the won-dollar exchange rate has emerged as a new burden. Prices of imported agricultural, livestock, and fisheries products, as well as processed foods-items sensitive to exchange rate fluctuations-are likely to rise further. Energy prices are also expected to increase, adding pressure to raise city gas and heating costs.
Last month, prices of agricultural, livestock, and fisheries products rose by 5.6% year-on-year, and there are concerns that prices of processed foods, which are facing higher raw material costs, could rise further within the year.
Experts warn that if inflationary pressures intensify while the income base of low-income households remains weak, their livelihood difficulties could worsen. In particular, households in the first quintile, which have a low proportion of earned income and a high proportion of essential expenditures, are classified as "price fluctuation vulnerable households," meaning they are likely to experience the impact of rising prices first and most severely.
Accordingly, there are growing calls for tailored measures such as strengthening income support for vulnerable groups, alleviating the burden of energy costs, and stabilizing food prices.
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