[Reporter’s Notebook] ‘Naratdon Effect’ Improves Household Income

[Sejong=Asia Economy Reporter Kim Hyunjung] "This is the most desirable direction for our economy to move forward. It is a result where various policy effects have ideally combined in a recovering economy."

President Moon Jae-in applauded the unprecedented improvement in income indicators by sharing the results of this year's third quarter Household Trends Survey on his social networking service (SNS). The president's brief post included all kinds of encouraging expressions such as 'desirable,' 'ideal,' 'good,' and 'joyful,' and it received hundreds of supportive comments in response.

Looking only at the related indicators announced on the same day, rapid income improvement among the poor and the alleviation of polarization were confirmed. Both earned income and business income of the lowest income group, the 1st quintile (bottom 20% income), rose by more than 20%, and the average monthly income of all households (4,729,000 won) increased by 8%, marking the largest increase since the government began compiling statistics in 2006. The quintile ratio, which shows the degree of income inequality by calculating how many times the income of the 5th quintile is compared to the 1st quintile, was 5.34 times, the lowest for the third quarter since the statistics began in 2006 (including before the statistical revision).

However, if asked whether this improvement trend can continue, the outlook is inevitably pessimistic. As the government also acknowledges, the income indicators were raised by 'government money' such as already distributed disaster relief funds, the Earned Income Tax Credit (EITC), basic pensions, and public jobs. Some of the government money is taxpayers' money, and the rest is 'debt.' To respond to the COVID-19 pandemic, the fiscal authorities are issuing national treasury bonds up to the legal limit. According to the Ministry of Economy and Finance, the total issuance of national treasury bonds last year was 174.5 trillion won, reaching the limit (174.5 trillion won). Issuing national treasury bonds up to the limit was the first time in six years since 2014 (97.5 trillion won). South Korea's national debt growth rate is the fastest among developed countries.

At the end of his post, President Moon wrote, "I hope that the good results will continue beyond the fourth quarter and lead to an improvement in the lives of the people." However, considering that household income declined for the first time in four years in the second quarter as the effect of disaster relief funds disappeared, it seems difficult to be optimistic about the third quarter of next year.

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