Value context and insight. lkm@koreatimes.co.kr
Salaried workers frustrated by inflation
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By Lee Kyung-min
By Lee Kyung-min
Inflation is no longer a term used only by scholars to describe the economy, as illustrated by salaried workers clearly experiencing a surge in prices of nearly all frequently purchased goods and services as well as borrowing costs while their monthly paycheck see little growth.
The shortage-oriented supply shock brought on by the COVID-19 pandemic led to sustained price increases for consumer goods, with the prospect of further hikes highly likely due to soaring commodity prices, notably global oil and raw material prices.
This further reduces the purchasing power of Korean salaried workers, whose wages are not rising fast enough to match up to double-digit increases in food and agricultural produce prices over the past few months.
Experts say inflation will continue through and beyond next year, propped up by supply bottlenecks and a recovery in the global economy and the resulting partial growth in consumer sentiment, but overall reduced spending power will shave off the country's gross domestic product (GDP) closely tied to household income.
The price of a pack of 30 eggs stands at 6,401 won ($5.4) as of this month, up 14.6 percent from a year ago. Franchise chicken brands raised the price about 2,000 won per pack, to 20,000 won. The price of sodas will be raised 5 percent.
Automobiles will see a price increase of between 5 percent and 7 percent, due to rising raw material prices. Also contributing to the unit price is supply disruption in the semiconductor industry.
Energy prices are also set to soar, as indicated by the Ministry of Trade, Industry and Energy discussing about a 10 percent hike in energy cost for private use in what they agreed is an inevitable measure to avoid losses.
Whether the Ministry of Economy and Finance will actively step into markets related to keep the vital part of key living costs under control remains to be seen. Also pressuring the finance ministry is volatile public sentiment ahead of the presidential election next year.
But even if the ministry freezes the rates for this year and early next year, the price increase will not be avoided but merely postponed to the next administration, since global oil prices are likely to hover at over $80 a barrel.
Workers in Europe are demanding a raise of at least 5 percent to offset the continued inflationary pressure over the past few years following pandemic lockdowns. A labor group joined by 20 percent of the workers at the European Central Bank are seeking the 5 percent increase, squarely rejecting the central bank's plan to go as high as 1.3 percent.
“Rising inflation will certainly put a dent in corporate performance, and the price increase will in turn be felt by consumers in the form of higher price tags. Demands for wage hikes in this context can be a vicious cycle eroding economic vitality,” said Seoul National University economist Lee In-ho.