Household Income Boosted by Disaster Relief Funds... Income Gap Widens Compared to Before When Excluding Public Transfers

Statistics Korea, Household Trends in Q2 2020

Average Monthly Household Income 5,272,000 KRW... Increased by 240,000 KRW from Previous Year
Impact of 127.9% Increase in Public Transfer Income Including Disaster Relief Funds
Earned, Property, and Business Income All Declined Together for the First Time Since 2003 Statistics

Income Gap Narrowed from 4.58 Times to 4.23 Times Compared to Previous Year
However, Quintile Ratio Excluding Disaster Relief Funds Worsened from 7.04 to 8.42

[Sejong=Asia Economy Reporter Joo Sang-don] The average monthly household income in the second quarter of this year increased by 240,000 KRW. Although earned, business, and property incomes all decreased, public transfer income rose significantly due to the government’s payment of emergency disaster relief funds of up to 1 million KRW to overcome the COVID-19 crisis. The gap between the lowest (1st quintile) and highest (5th quintile) income groups also narrowed due to the disaster relief funds, as public transfer income accounts for a relatively higher proportion of total income in the 1st quintile. However, the income gap based on market income excluding the disaster relief funds widened.

On the 20th, Statistics Korea released the 'Household Trends in the Second Quarter of 2020' containing these details. According to the report, the average monthly household income in the second quarter was 5,272,000 KRW, a 4.8% increase compared to 5,032,000 KRW in the same quarter last year.

Regular income, which includes earned, business, property, and transfer income, increased by 4.3%, while non-regular income, such as condolence income and actual insurance reimbursements, rose by 44.4%.

The increase in regular income was mainly due to a significant rise in transfer income following the disaster relief payments. Earned income decreased by 5.3%, business income by 4.6%, and property income by 11.7%, marking the first simultaneous decline since statistics began in 2003. In contrast, transfer income surged by 80.8%. In particular, public transfer income, which includes disaster relief funds, increased by 127.9%.

The rise in public transfer income is largely attributed to the disaster relief funds. In the second quarter of this year, 64.8% of public transfer income was social benefits, most of which were disaster relief funds. This proportion was only 30.5% in the second quarter of last year.

The increase rate of public transfer income due to disaster relief funds was more pronounced in the 5th quintile. While public transfer income in the 1st quintile rose by 70.1%, it increased by 175.3% in the 5th quintile. Statistics Korea explained, "The 5th quintile has an average household size of 3.52 members, larger than the 1st quintile’s 2.34 members, which influenced the disaster relief payments being distributed based on household size."

The decline rate in earned income was greater in the 1st quintile. The 1st quintile saw an 18% decrease, whereas the 5th quintile only decreased by 4%. However, the absolute earned income in the second quarter was 485,000 KRW for the 1st quintile (compared to 592,000 KRW in the same quarter last year) and 6,902,000 KRW for the 5th quintile (compared to 7,192,000 KRW), so the 5th quintile’s decrease in amount was larger by 290,000 KRW.

As the earned income decline was larger in the 5th quintile, the income gap represented by the income quintile ratio narrowed from 4.58 times in the second quarter last year to 4.23 times this year. However, the income gap based on market income excluding public transfer income widened from 7.04 times to 8.42 times during the same period. Excluding the effect of disaster relief funds, the income gap actually increased.

The average monthly household consumption expenditure in the second quarter was 2,912,000 KRW, a 2.7% increase compared to the same quarter last year. Spending on food and non-alcoholic beverages (20.1%), household goods and services (21.4%), and transportation (24.6%) increased, while expenditures on clothing and footwear (-5.8%), recreation and culture (-21.0%), education (-29.4%), and food and accommodation (-5.0%) decreased.

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