[The Editors' Verdict] Why We Must Reflect on the Decline in Youth Income

[Asia Economy Reporter Choi Il-gwon] The government and the ruling party have clearly put their lives on the line for the youth vote in next year's presidential election. Following the announcement of a plan to supply youth jeonse rental housing, last month they also unveiled an asset-building plan targeting low-income youth, where the government matches up to three times the amount these youths save. Perhaps finding this insufficient, they introduced a program last week to provide interest-free loans of 200,000 won for monthly rent payments to address housing issues. In the budget proposal announced today for next year, these youth measures are grouped into a separate category with a budget of 23.5 trillion won. Considering the total budget submitted to the National Assembly is 604.4 trillion won, nearly 4% of the budget is explicitly designated as 'for youth.'

Among the youth measures, the government prioritizes jobs above all else. The budget has been increased by 1.5 trillion won from last year to 5.5 trillion won. This includes the establishment of youth employment incentives and a somewhat unfamiliar term, 'new support for youth-friendly corporate ESG.' Additionally, considering the difficulty of job searching, the government plans to expand youth-exclusive startup funds and introduce a new system called 'support for youth re-challenge after business closure.'

The government and ruling party focus on youth employment because, ultimately, livelihood is the core of everything. The asset formation and housing issues for these groups, which the government and ruling party have pledged to support, cannot be resolved without income. This will even influence the outcome of next year's presidential election. Jobs are essentially the measure of public sentiment.

The sense of crisis felt by the government and ruling party toward the youth is by no means exaggerated. The shrinking economic power of the youth can be confirmed through numbers. An analysis of microdata from the Statistics Korea Household Income and Expenditure Survey shows that among the top 20% income group (5th quintile), households with heads aged 20-39 had an average monthly income of 8,523,000 won in the second quarter, down nearly 400,000 won from 8,906,000 won in the same period last year. Although business income increased from 1,268,000 won to 1,417,000 won, earned income, which accounts for a significant portion of income, decreased from 6,482,000 won to 6,393,000 won.

This contrasts with middle-aged and elderly households with heads aged 40 and above. In the second quarter, the 40-59 age group in the 5th quintile had an average monthly income of 9,170,000 won, up from 9,111,000 won in the same period last year, and the 60 and older elderly group’s 5th quintile income sharply rose from 9,284,000 won to 10,108,000 won.

While household income for heads aged 20-39 decreased, expenditures increased from 6,047,000 won to 6,159,000 won during the same period. They earned less but spent more. In particular, while consumption expenditures on various goods slightly decreased, non-consumption expenditures such as taxes and social insurance premiums increased. Current taxes, including income tax and property tax, rose from 411,000 won last year to 448,000 won this year in the second quarter. This indicates that despite wanting to reduce consumption due to decreased income, it was difficult to tighten belts because essential expenditures increased.

The situation was similar for the lowest 20% income group (1st quintile). While the income of middle-aged individuals aged 40-59 increased from 907,000 won in the second quarter last year to 964,000 won this year, the income of youth in the lowest 20% dropped from 987,000 won to 911,000 won.

Since income thresholds for each quintile vary relatively according to total income, explaining the background of these fluctuations is not straightforward. However, it is clear that the income growth rate of youth household heads is lower compared to other age groups. This can also be interpreted as indicating persistent labor market rigidity. If the ruling party wants to capture the youth vote in next year’s presidential election, it seems unavoidable to confront the formidable challenge of labor vested interests.

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