During the COVID-19 Period, Low-Income Groups Faced 1.4 Times Higher Price Burden Than High-Income Groups

Lower Income Groups Experience Higher Perceived Inflation Rates

[Asia Economy Reporter Park Sun-mi] During the COVID-19 period, the burden caused by rising prices has been relatively concentrated on low-income groups, raising calls for price stabilization measures targeted at low-income households.

On the 21st, the Korea Economic Research Institute examined changes in perceived prices by income quintile comparing 2018-2019 to 2020-2021, finding that lower-income groups felt the price increases more acutely. This indicates that since the outbreak of COVID-19, the price burden on low-income groups has been relatively greater.

The perceived inflation rates were 2.7% for the 1st quintile, 2.4% for the 2nd, 2.2% for the 3rd, 2.1% for the 4th, and 1.9% for the 5th, showing that the higher the income level, the lower the perceived inflation rate. The perceived inflation rate of the bottom 20% (1st quintile) was 1.4 times that of the top 20% (5th quintile).

The Korea Economic Research Institute pointed out that the reason low-income groups feel price increases more than high-income groups is that prices of items with a higher expenditure share for low-income groups rose relatively more.

Since the outbreak of COVID-19, the 1st quintile mainly spent on ▲food and non-alcoholic beverages (22.4% expenditure share), ▲housing, water, electricity, and gas (19.6%), and ▲health (13.3%), which are essential goods and health-related expenses. The 5th quintile, meanwhile, had higher expenditure shares on ▲transportation (14.3%), ▲food and accommodation (13.3%), and ▲food and non-alcoholic beverages (13.3%), indicating a higher share of spending not only on food but also on transportation and dining out.

Additionally, prices of the top three items with higher expenditure shares in the 1st quintile compared to the 5th quintile (▲housing, water, electricity, and gas (+10.9 percentage points difference), ▲food (+9.1 percentage points), ▲health (+5.3 percentage points)) rose by an average of 3.7%. In contrast, prices of the top three items with higher expenditure shares in the 5th quintile compared to the 1st quintile (▲education (+8.5 percentage points difference), ▲transportation (+7.0 percentage points), ▲food and accommodation (+2.9 percentage points)) increased by only 0.7% on average. The Korea Economic Research Institute estimates that this result is due to increased time spent at home caused by COVID-19 effects such as remote work, which significantly boosted demand for essential goods and health-related items.

Choo Kwang-ho, head of the Economic Policy Office at the Korea Economic Research Institute, stated, “The inflation shock caused by COVID-19 is relatively concentrated on low-income groups,” adding, “It is necessary to expand job opportunities for low-income groups to increase their income, while minimizing price increases through stabilizing agricultural product supply and improving the efficiency of food distribution structures to alleviate the price burden on low-income households.”

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