[Ordinary People Report] When Low-Income Earners Take on Side Jobs, High-Income Groups Increase Real Estate Assets (Comprehensive)

Shinhan Bank '2020 Ordinary People's Financial Life Report'
Households Earn an Average of 4.86 Million KRW per Month and Spend 2.41 Million KRW... Income Increased by 100,000 KRW in One Year, but Consumption Rose by 30,000 KRW
Top 20% Real Estate Assets 12.3 Times That of Bottom 20%, Deepening Polarization
Due to 52-Hour Workweek and Economic Downturn, 1 in 10 People Have Side Jobs

[Asia Economy Reporter Kwon Haeyoung] The average household in South Korea earned 4.86 million KRW per month last year and spent half of it, 2.41 million KRW. Although monthly income increased by an average of 100,000 KRW compared to the previous year, consumption only rose by 30,000 KRW. Amid uncertain economic conditions, as income growth slowed, households tightened their belts and saved the remaining income as surplus funds. While the number of 'two-jobbers' who juggle main and side jobs increased due to tough living conditions, the gap in real estate assets between high-income and low-income households widened due to rising housing prices, intensifying polarization.

Earned 4.86 million KRW monthly, spent half... Consumption barely increased amid tough living conditions

Shinhan Bank analyzed this in its '2020 Ordinary People's Financial Life Report' released on the 27th. The report is based on an email survey conducted from September to October last year targeting 10,000 economically active individuals aged 20 to 64 nationwide (95% confidence level, margin of error ±0.98%p).

According to the report, the average monthly household income last year was 4.86 million KRW, up 100,000 KRW from 4.76 million KRW the previous year. Income increased across all brackets but was less than the 140,000 KRW increase in monthly income the year before. As income growth slowed, consumption rose by only 30,000 KRW to 2.41 million KRW from 2.38 million KRW the previous year. Food expenses were the highest at 500,000 KRW, followed by transportation and communication costs at 360,000 KRW, education expenses at 280,000 KRW, and monthly rent and maintenance fees at 260,000 KRW.

Shinhan Bank explained, "Basic living expenses such as food, transportation and communication, and rent and maintenance fees increased by only 10,000 to 20,000 KRW compared to the previous year. Due to stagnant household income amid uncertain economic conditions, spending did not increase, and spending patterns from 2018 were maintained last year."

Monthly savings and investments were 1.17 million KRW, and debt repayment was 410,000 KRW, maintaining similar levels to the previous year. Households reduced savings in existing investment products and adjusted their portfolios toward stable savings, subscription savings, and insurance. The remaining 870,000 KRW was kept as household surplus funds, increasing its share from 17.2% to 17.9%.

The number of households with debt decreased. The debt holding rate dropped to 52.8% from 57.2% the previous year. However, the average debt balance of indebted households increased by 10.64 million KRW to 83.13 million KRW from 72.49 million KRW. Due to rising real estate prices, total household assets rose by 19.58 million KRW to 419.97 million KRW from 403.9 million KRW the previous year. Real estate assets, which account for 76% of total assets, increased by 15.25 million KRW, while financial assets and other assets including automobiles rose by 2.19 million KRW and 2.14 million KRW respectively.

Polarization of real estate assets by class deepens... Gap between top and bottom 20% widened from 11.6 times to 12.3 times
Buying a 700 million KRW apartment yielded gains equal to loan amount over 3 years

Income disparity by income class remained similar to the previous year. The top 20% income group (5th quintile) earned 9.02 million KRW monthly, while the bottom 20% (1st quintile) earned 1.89 million KRW, maintaining a 4.8 times gap from the previous year.

However, polarization of real estate assets by income class intensified. Real estate, which accounts for the largest portion of total assets, is larger for higher income groups and saw greater asset growth compared to 2018. Real estate assets per household income were 694.33 million KRW for the top 20%, up 31.26 million KRW from 663.07 million KRW the previous year, while the bottom 20% had 5.64 million KRW, down 0.55 million KRW from 5.699 million KRW. The gap in real estate assets between these groups widened from 11.6 times in 2018 to 12.3 times in 2019. The total asset gap including real estate was 882.94 million KRW for the top 20%, 9.592 million KRW for the bottom 20%, a 9.2 times difference.

The 'rich get richer, poor get poorer' phenomenon was also prominent, where those with borrowing capacity took on as much loan as possible to buy expensive homes, resulting in larger capital gains. People who bought apartments priced over 700 million KRW in the past 3 years earned capital gains exceeding 80% of their loan principal due to rising housing prices.

The average loan principal at the time of purchase for apartments over 700 million KRW in the past 3 years was 198.64 million KRW, about 21% of the home price. Since purchase, the average apartment price increase was 166.29 million KRW, equivalent to 84% of the loan amount. This means they earned gains close to the loan amount.

Expanding the range to apartments priced over 500 million KRW, buyers in this price range saw price increases exceeding half of their loan principal. For apartments priced between 500 million and 600 million KRW, the average loan was 183.07 million KRW, and the price increase was 102.4 million KRW, or 56% of the loan amount.

The higher the apartment purchase price, the greater the value increase after purchase. Apartments over 700 million KRW rose by an average of 166.29 million KRW, 500-600 million KRW apartments rose by 102.4 million KRW, 400 million KRW apartments rose by 72.96 million KRW, and 300 million KRW apartments rose by 45.92 million KRW. These correspond to 56%, 42%, and 31% of the loan amounts respectively.

A Shinhan Bank official explained, "Although loans were inevitable to purchase apartments, the significant rise in real estate prices positively impacted asset growth."

In contrast, low-priced apartments saw minimal price increases during the same period. Apartments priced below 100 million KRW rose by 6.7 million KRW (9% of loan amount), and 200 million KRW apartments rose by 16.26 million KRW (13% of loan amount). Despite covering more than half of the purchase price with loans, these increases fell short of the nationwide average apartment price increase of 14% over 3 years.

The loan-to-price ratio was lower for higher-priced homes. For homes over 700 million KRW, it was 21%, 33% for 500-600 million KRW, 41% for 400 million KRW, and 53% for 100-200 million KRW apartments.

During the same period, Seoul had the highest regional home price increase at 21%, followed by Gyeonggi and Incheon at 14%, the five major metropolitan cities at 12%, and other provinces at 7%.

Respondents who purchased apartments for residence said they would consider selling if the apartment price rose more than 20% above current value within the next 3 years. Desired increases were 25% for Seoul, 26% for Gyeonggi and Incheon, 26% for the five major metropolitan cities, and 22% for other provinces. This indicates expectations for investment returns exceeding those of Seoul apartment buyers over the past 3 years.

Worst recession, tough living conditions lead to increase in two-jobbers

Households with relatively low income faced even tougher living conditions. Due to reduced monthly income from the 52-hour workweek, economic downturn, and employment insecurity, 1 in 10 economically active people now work two jobs, combining main and side jobs. This is an increase from 1 in 12.5 a year ago. However, the average monthly income from side jobs was only 540,000 KRW, about a quarter of the main job income (2.28 million KRW).

The proportion of two-jobbers rose from 8.1% in 2018 to 10.2% last year. Additionally, 24.5% of respondents said they plan to have two jobs in the future. This means one-third of economically active people are either current or potential two-jobbers.

The main reason for holding two jobs was livelihood-related, to secure necessary funds, accounting for 65.7%. This was followed by leisure (11.8%), self-development (11.7%), and hobbies (10.8%).

The main job occupations of two-jobbers were office workers and public officials at 45.7%, followed by freelancers at 16.6%, self-employed at 15.5%, and sales, service, skilled, and production workers at 11.8%.

Shinhan Bank explained, "Livelihood-type two-jobbers have a relatively high proportion of self-employed with irregular income, while leisure-type are professionals with higher income, showing differences in two-job types depending on main job characteristics. Livelihood-type side jobs include substitute driving, delivery drivers, home-based side jobs, and office assistance."

Among two-job types, leisure types mainly worked as part-time instructors at academies, self-development types in translation and interpretation, and hobby types as tutors for hobbies and talent trading.

The average main job income for two-jobbers was 2.28 million KRW per month, 950,000 KRW less than the 3.23 million KRW monthly income of single-job workers. However, by working an average of 45.5 hours per month on side jobs, they earned an additional 540,000 KRW, bringing total income to 2.82 million KRW, still 410,000 KRW less than single-job workers.

The hourly wage for side jobs among two-jobbers was about 12,000 KRW, 1.4 times higher than the 2019 minimum wage of 8,350 KRW. This required working an additional 1 hour and 30 minutes daily for 30 days a month beyond main job hours.

Those planning to have two jobs in the future have an average monthly income of 3.1 million KRW and hope to earn an additional 1.09 million KRW through side jobs.

A Shinhan Bank official said, "Reduced monthly income due to the 52-hour workweek, economic downturn, and employment market insecurity likely influenced the choice to work two jobs. Since side jobs can utilize skills or strengths from the main job, side job hourly wages can be higher. Although juggling main and side jobs is not easy, the number of two-jobbers is expected to increase."

This content was produced with the assistance of AI translation services.