Household Income in Q2 Falls for First Time in 4 Years... Income Polarization Worsens Without 'Support Fund Effect'

Statistics Korea 'Q2 Household Trends Survey'

Source: Statistics Korea

[Sejong=Asia Economy Reporter Son Seon-hee] Household income in the second quarter of this year decreased for the first time in four years. When excluding the temporary effect of the disaster relief funds distributed nationwide in May last year, income polarization was found to have worsened further.

◆ Household income in Q2 decreased for the first time in 4 years... due to the disappearance of the 'disaster relief fund' temporary effect = According to the 'Q2 Household Trends Survey' released by Statistics Korea on the 19th, the average monthly income of households with one or more members nationwide (including agricultural, forestry, and fishery households) in the second quarter of this year was 4,287,000 KRW, down 0.7% compared to the same period last year. This is the first time since Q2 2017 that household income has decreased on a quarterly basis.

This is analyzed as a base effect caused by the temporary increase in household income due to the nationwide disaster relief funds distributed in May last year. The average transfer income per household in Q2 was 617,000 KRW, down 28.6% from a year earlier.

Income earned through labor was 2,743,000 KRW, and income from business activities was 806,000 KRW, increasing by 6.5% and 3.6%, respectively. Non-regular income such as congratulatory income or retirement allowances was 79,000 KRW, and property income through interest and dividends was 42,000 KRW.

Jung Dong-myung, Director of the Social Statistics Bureau at Statistics Korea, explained, "Although labor and business income increased simultaneously due to improved employment conditions and better business conditions for self-employed workers in Q2, total income decreased as public transfer income declined. Public transfer income decreased by 37.1% compared to the same quarter last year, which is because social benefits, which had sharply increased due to the nationwide disaster relief funds, decreased this quarter."

Source: Statistics Korea

◆ Only the 'top 20%' saw income increase... polarization deepens = Looking at household income by quintile in the second quarter, income decreased across all households except for the 5th quintile, which corresponds to the 'top 20%.'

For the 1st quintile, which has a low proportion of labor income and is effectively dependent on public transfer income, the disappearance of the disaster relief fund effect paid last year resulted in Q2 income falling to 966,000 KRW, marking the largest decrease of 6.3%.

Household income in the 4th quintile, where middle-class households are concentrated, was 5,192,000 KRW, down 3.1% from the same quarter a year earlier. This was followed by the 2nd quintile households at -0.9% (income 2,365,000 KRW) and the 3rd quintile households at -0.7% (income 3,661,000 KRW). The 5th quintile households recorded an average monthly income of 9,241,000 KRW, the only quintile to see an income increase (1.4%).

Accordingly, the 5th quintile ratio, which shows the real 'rich-poor gap' based on disposable income, worsened to 5.59 compared to 5.03 last year. The income distribution indicator had temporarily improved due to the disaster relief funds last year, but as that effect disappeared, the true face of income polarization was immediately revealed.

The overall household financial balance worsened compared to a year ago. The average monthly disposable income per household in Q2 was 3,454,000 KRW, down 1.9% from a year earlier. The surplus amount also fell to 979,000 KRW, a 13.7% decrease over the same period.

Director Jung of the Social Statistics Bureau said about the worsening 5th quintile ratio, "Although labor and business income increased in Q2, showing a general market recovery, the base effect of the nationwide disaster relief funds in May last year had a significant impact. The decrease in public transfer income seems to have affected the lower quintiles more."

The government explained that last year, the shock of the COVID-19 pandemic was so severe and large-scale policy support was concentrated, causing an unusual increase in public transfer income. Although the income of low-income groups (1st quintile) significantly decreased due to the disaster relief funds, labor income and business income increased by 19.6% and 16.1%, respectively.

The Ministry of Economy and Finance stated, "We will promptly execute the second supplementary budget projects for livelihood support and maintain and supplement market jobs through employment retention subsidies and first and second supplementary budget job projects. We will also strengthen efforts to maintain and create private sector jobs, such as digital workforce training, to continuously improve market income and distribution conditions."

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