Income Polarization Worsens... Gap Between Top and Bottom 20% at 4.72 Times

Statistics Korea '2020 4th Quarter Household Trends Survey Results'
0.08%p Increase Compared to Same Period Last Year
Labor Income Polarization Worsened Despite Financial Support for Low-Income Groups

Two days before the Lunar New Year holiday, on the 9th, Kyungdong Market in Dongdaemun-gu, Seoul, is bustling with citizens preparing ritual items. Photo by Moon Honam munonam@

[Asia Economy Reporter Jang Sehee] Although the government injected fiscal resources such as disaster relief funds to respond to the damage caused by COVID-19, the income gap between low-income and high-income groups has widened. The top 20% (5th quintile) saw an increase in earned income, while the bottom 20% (1st quintile) experienced a decrease in earned income despite financial support, thereby widening the gap. The government announced that it will make every effort to resolve the distribution deterioration caused by COVID-19 and stabilize employment.

According to the "2020 4th Quarter Household Trends Survey Results" released by Statistics Korea on the 18th, the equivalized disposable income quintile ratio, used as an income distribution indicator, rose by 0.08 points from the 4th quarter of 2019 to 4.72. The income quintile ratio divides income groups into five and calculates the average income of the top 20% (5th quintile) divided by the average income of the bottom 20% (1st quintile).

If income distribution were perfectly equal, the income quintile ratio would be 1, and the higher the value, the more severe the inequality in income distribution between high-income and low-income groups.

In the 3rd quarter, the quintile ratio was 4.88, worsening by 0.22 points compared to a year earlier. The only quarter last year when the quintile ratio improved was the 2nd quarter, when nationwide disaster relief funds were distributed.

The 2nd quarter quintile ratio was 4.23. Jung Dongmyung, Director of the Social Statistics Bureau at Statistics Korea, explained, "It appears that the income distribution improvement effect of the first large-scale disaster relief fund for the entire population was significant."

Regarding this, Hong Namki, Deputy Prime Minister and Minister of Economy and Finance, stated, "The income of the bottom 20% (1st quintile) increased by 1.7% in the 4th quarter of last year, while the income of the top 20% (5th quintile) increased by 2.7%, causing the quintile ratio, which shows the income gap, to rise by 0.08 points to 4.72 compared to the previous year, indicating a worsening distribution. We will make every effort to resolve the distribution deterioration caused by COVID-19 and stabilize employment."

◆ While the 5th quintile's average monthly income increased by 2.7% compared to a year ago, the 1st quintile rose by 1.7% = The average monthly income of the 1st quintile (bottom 20%) was 1.64 million KRW, up 1.7% from the same period last year. Although it decreased by 1.1% in the 3rd quarter of last year, it returned to an upward trend in the 4th quarter. The 2nd quintile (bottom 40%) and 3rd quintile (top 60%) were 3.275 million KRW and 4.628 million KRW, respectively, increasing by 0.1% and 1.2% from the previous year. The 5th quintile's average monthly income was 10.026 million KRW, up 2.7% from a year earlier. The 4th quintile (upper 40%), which is the near-poor class, also increased by 2.0% to 6.231 million KRW compared to the previous year. Despite the spread of COVID-19, income increased more among high-income households.

The gap in earned income is widening further. The earned income of the 1st quintile was 596,000 KRW, down 13.2% from the same quarter last year. This is the largest decline in two years since 2018 (-36.8%) for the same quarter. The earned income of the 1st quintile has decreased for four consecutive quarters: -3.3% in Q1, -18.0% in Q2, -10.7% in Q3, and continuing in Q4 last year. In contrast, the earned income of the 5th quintile increased by 1.8% from the previous year to 7.214 million KRW, the only group to see growth among all income groups.

Meanwhile, public transfer income, including government support funds, was highest in the 1st quintile at 543,000 KRW, indicating that this group received the most government support. In terms of growth rate, the 1st quintile increased by 17.1%, which was lower than the 2nd quintile (492,000 KRW) at 25.0%, the 3rd quintile (390,000 KRW) at 26.5%, and the 4th quintile (390,000 KRW) at 33.6%. The 5th quintile was 269,000 KRW, increasing by only 11.7% compared to the previous year.

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