Value context and insight. lkm@koreatimes.co.kr
Salaried workers frustrated due to inflation
gettyimagesbank
By Lee Kyung-min
By Lee Kyung-min
Salaried workers are increasingly feeling the pinch of “inflation,” as clearly indicated by a surge in prices of goods and services as well as interest rates.
The economic term is not only for use among academics, economists and central bankers, since many people are increasingly finding the price of everything to be on the rise ― except for their monthly paycheck.
This common frustration is expected to intensify, because the cost of living will spike further amid the collective move by fiscal and monetary authorities in drawing down the expansionary policies put in place to weather the COVID-19 pandemic. This will translate into higher tax and heavier borrowing costs.
Deputy Prime Minister and Finance Minister Hong Nam-ki maintains that inflation concerns will gradually dissipate in the latter half of the year, as soon as the temporary shock from last year's base effect recedes.
But once the prices of goods and services start rising, the result is an overall depreciation of the currency, limiting the spending power of consumers.
Statistics Korea data showed consumer prices rose 2.6 percent year-on-year in May. comparable to the increase of the same figure in April 2012. The figure for April was 2.3 percent. This exceeded the central bank's target of 2 percent for the past two straight months.
The consumer price index for 142 daily necessities frequently purchased by consumers rose 3.3 percent, while agricultural produce jumped 16.6 percent.
The price of noodles rose 7.2 percent, followed by cooking oil (6.3 percent), tofu (6.2 percent) and bread (5.9 percent).
A separate quarterly survey conducted by the statistics office showed the average monthly income per household in the first three months of this year at 4.3 million won ($3,800), up 18,000 won 0.4 percent, year-on-year.
Yet the income growth was more than offset by higher spending in the same period. The average monthly consumption rose to 2.4 million won, up 1.6 percent or 39,000 won.
Income earned by salaried workers fell 1.3 percent to 2.7 million won. This was the steepest quarterly decline to date.
Nearly a quarter of households, or 24.6 percent, were in debt, having spent more than they earned. Over half, or 60.6 percent, of the bottom 20 percent were in this category.
The borrowing cost for households was 2.91 percent in April, up 0.36 percentage point from the previous low of 2.55 percent in August last year.
Mortgage rates stood at 2.73 percent, up 0.34 percentage point over the same period. The interest rate on credit loans also rose to 3.65 percent, up 0.79 percentage point.