Value context and insight. lkm@koreatimes.co.kr
Income disparity narrowed only due to gov't one-off relief payments
By Lee Kyung-min
By Lee Kyung-min
The COVID-19 pandemic has dealt a heavier blow to lower-income earners, most of whose household income saw an unlikely jump in the second quarter thanks only to the 1 million won ($842) in cash-equivalent emergency relief the government provided, data showed Thursday.
Korea reported a drop in earned, business and asset incomes in the April-June period. This is the first time in the 17 years that the agency has been compiling related data that it has seen all three major sources of household income drop at once. Also of note was that the drop in earned income, the first since 2009, was brought on by a steep increase in the number of jobs lost in the second quarter.
Experts say the government should not overemphasize the significance of the narrowed income gap between the top 20 percent and the bottom 20 percent, stressing the one-off measure would do little to improve worsening economic and financial conditions of lower earners that suffered layoffs, unpaid leave and pay cuts.
Statistics Korea data showed the overall household income averaged 5.27 million won in the April-June period, up 4.8 percent from a year earlier, due only to an 80.8 percent year-on-year increase in the government transfer income paid in the form of “disaster income.”
The heavy government spending managed to limit what would have been a steep drop in income earned by the bottom 20 percent. The group suffered an 18 percent year-on-year drop in earned income, 15.9 percent in business income and 9.4 percent in asset income.
The top 20 percent suffered only a 4 percent year-on-year drop in earned income and 2.4 percent drop in business income.
The monthly household income of the top 20 percent earners averaged 10.03 million won, up 2.6 percent from the year before. That of the bottom 20 percent earners averaged 1.77 million won, up 8.9 percent from the year before.
The income disparity ratio measured by earnings of the top 20 percent divided by the bottom 20 percent dropped to 4.23, down from 4.58 a year earlier.
Spending on groceries and non-alcoholic beverages jumped 20.1 percent from a year earlier, as many people ate at home instead of eating out amid the pandemic. By contrast, spending on entertainment and cultural activities decreased 21 percent from the year before.
Seoul National University economist Lee In-ho said the government transfer payment may have helped avert a sharper fall of household income for low earners but the government claiming the idea that the measure improved income disparity is far-fetched.
“The government cannot continue to offer transfer income, which means the situation report is certain to become worse in the coming months. The true meaning of narrowed disparity can be discussed only when all three income report a significant rise without government help,” he said.