Q1 Wage and Business Income Both Decline... Income Before Disaster Relief Fund Increase

Quintile Ratio Improvement... Government Praises "Income Distribution Improvement Due to Inclusive Policy Effects"

[Sejong=Asia Economy Reporter Moon Chaeseok] It has been revealed that the earned labor and business income per household decreased in the first quarter. Total income increased due to the rise in transfer income reflecting the effect of disaster relief funds. The gap between the first quintile (bottom 20%) and the fifth quintile (top 20%) in terms of disposable income, which refers to money actually available for spending, narrowed, improving the distribution indicator of the equivalized disposable income quintile ratio.

According to the first quarter Household Trends Survey data released by Statistics Korea on the 20th, labor income per household in the first quarter decreased by 1.3% compared to the same quarter last year to 2,778,000 KRW, and business income fell by 1.6% to 767,000 KRW. Both property income (-14.4%) and non-regular income (-26.2%) showed a declining trend, while transfer income, reflecting the effect of disaster relief funds, increased by 16.5% to 723,000 KRW. Total income was 4,384,000 KRW, up 0.4% from the first quarter of the previous year.

By income quintile, income increased in the first quintile (bottom 20%) and decreased in the fifth quintile (top 20%). The first quintile saw a decrease in market income due to a reduction in temporary and daily workers, but total income rose by 9.9% as transfer income surged by 15.8%. The fifth quintile experienced an increase in business and transfer income, but total income decreased by 2.8% due to a decline in labor income caused by reduced bonuses. Disposable income for the first quintile was 728,000 KRW, up 11.6% from the same quarter last year, while the fifth quintile’s disposable income was 7,580,000 KRW, down 3.4%. Accordingly, the fifth quintile ratio improved for the second consecutive quarter following the fourth quarter of last year, with an improvement margin (-0.59 ratio points) larger than the deterioration margin (0.15 ratio points) in the first quarter of 2020.

However, overall labor and business income declined, and total income for the fifth quintile also contracted, indicating ongoing difficulties related to market income. Looking at labor income growth rates by quintile: first quintile -3.2%, second quintile -1.5%, third quintile 6.5%, fourth quintile -0.7%, and fifth quintile -3.9%. For business income growth rates: first quintile -1.5%, second quintile 2.6%, third quintile -11.8%, fourth quintile -3.7%, and fifth quintile 4.0%.

Household consumption expenditure increased by 1.6% compared to the first quarter of the previous year. While spending on entertainment, dining out, and transportation decreased, expenditures on food and non-alcoholic beverages increased. With rising food prices, the monthly average consumption expenditure of the first quintile, where food accounts for a large share of spending, rose by 9.8% to 1,125,000 KRW compared to the previous year. This figure is similar to the 9.9% increase in income for the first quintile.

The government positively evaluated the improvement in income distribution indicators but expressed concern over the overall contraction in market income. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, chaired a meeting of related ministers (Green Room Meeting) at the Government Seoul Office on the morning of the same day, stating, "The fifth quintile ratio has improved for two consecutive quarters following the fourth quarter of last year, and the improvement margin (-0.59 ratio points) exceeded the deterioration margin (0.15 ratio points) in the first quarter of last year. This is an improvement compared to the first quarter of 2019 before COVID-19."

However, Deputy Prime Minister Hong added, "Overall, labor and business income are decreasing, and total income for the fifth quintile is also contracting, indicating ongoing difficulties in market income. We will strengthen policy responses to polarization caused by COVID-19 and actively strive to ensure that the recent economic recovery leads to overall employment and income improvements."

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