One in Four Households Faces Deficit Living... Over Half of the Bottom 20% Low-Income Group

The Proportion of Households with Deficit in Q2 Rose 4.4%p to 24.4% Compared to a Year Ago

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[Sejong=Asia Economy Reporter Moon Chaeseok] The proportion of households that spent more than they earned in the second quarter of this year increased by 4.4 percentage points (p) compared to a year ago, reaching 24.4%. This means that one in four households ran a deficit. The number of deficit households increased the most among the lowest income group. It is interpreted that while income decreased, household expenditures increased due to factors such as rising prices.

According to the second quarter Household Trend Survey recently released by Statistics Korea on the 22nd, the proportion of deficit households among the first quintile (lowest 20% income) was 55.3%, up 8.2%p from the same period last year. The increase in the first quintile is much larger than in other quintiles. It stands out compared to the second quintile (25.4%, +4.8%p), third quintile (15.6%, +1.5%p), fourth quintile (15.5%, +5%p), and fifth quintile (10.5%, +2.8%p). The proportion of deficit households refers to the percentage of households whose consumption expenditure exceeds their disposable income (income minus non-consumption expenditures such as taxes and social insurance premiums).

An official from Statistics Korea explained, "Last year, household income temporarily increased due to the nationwide disaster relief fund, but this effect disappeared in the second quarter of this year, resulting in lower income than a year ago. While employment improved and the self-employed business conditions got better, expenditures increased, causing the proportion of deficit households to rise in all quintiles compared to last year."

The average monthly income per household in the second quarter (4,287,000 KRW) decreased by 0.7% compared to a year ago, mainly due to a decrease in public transfer income (down 172,000 KRW), while expenditures (3,308,000 KRW) increased by 4%. By income level, expenditures increased in the first, second, third, and fifth quintiles except the fourth quintile, and income increased only in the top 20% (fifth quintile). Last year, the nationwide disaster relief fund played a significant role as a shield against deficits, but this year it was difficult to expect such support. The deficit household ratio in the second quarter of last year was 20%, which was 5.7%p lower than in the second quarter of 2019. In particular, the deficit household ratio among low-income groups worsened compared to before the COVID-19 pandemic.

In the second quarter of this year, the deficit household ratio among the first quintile households increased by 2.6%p compared to the second quarter of 2019. The fourth quintile rose by 0.3%p, while the other quintiles decreased. The first quintile originally had a high deficit ratio because their earnings were low and there was a limit to reducing essential expenditures, and the situation has worsened.

First quintile households earned an average of 966,000 KRW per month and spent 1,153,000 KRW on consumption in the second quarter of this year. In 2019, they earned 904,000 KRW and spent 970,000 KRW. This means that while income increased by 62,000 KRW, expenditures increased nearly threefold by 183,000 KRW. Last year, they earned 1,031,000 KRW and spent 1,077,000 KRW. A Statistics Korea official said, "Compared to 2019, consumption expenditures increased significantly, influenced by the sharp rise in prices of food and other goods."

The second quarter Household Trend Survey did not reflect the impact of the fourth wave of COVID-19 and the resulting strengthened social distancing measures.

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