By Yoon Ja-young
Lim, a senior manager at a mid-tier manufacturing company, earns over 100 million won in annual salary, but he doesn’t think he has enough money for spending. And as retirement approaches, the 52-year-old is concerned about how he will continue to support his family.
Households headed by those in their 50s have the highest incomes and disposable incomes among all age groups, but their average propensity to consume is among the lowest, statistics show.
According to Statistics Korea, the Average Propensity to Consume (APC) of the country’s households stood at 72.9 percent last year, down 5 percentage points from 2003. The APC shows how much one has spent for consumption among disposable income. The falling APC means that households are cutting consumption while increasing savings.
By age brackets, the fall was especially notable with elderly households.
The households in their 60s had an APC of 69.6 percent, down 11.5 percentage points from 2003. Back then they had the highest propensity to consume among all age groups.
Those in their 50s also saw their ratio fall to 69.7 percent from 75.4 percent in 2003. They have the highest monthly income of 5 million won and disposable income of 4 million won among all age groups, but their APC was among the lowest.
The statistics go against general economic theory that says the propensity to consume is higher among the elderly.
Kwon Kyoo-ho, an associate fellow at the Korea Development Institute (KDI), said all age groups are cutting spending to prepare for life after retirement.
“As people live longer after retirement, they need more funds. Most of the age groups are cutting consumption to prepare for this,” he said. “Such trends seem to be especially evident among those nearing the retirement age,” he added.
The researcher showed concern that consumption is likely to slow down further when those in their 30s and 40s get older because the average age in society is rising rapidly. .
Thus he added that the government should focus on taking structural measures instead of short-term stimulus measures.
“Boosting consumption without measures to increase income is likely to further hinder consumption after one gets older,” he said.
He added that the government may consider delaying the retirement age and support elderly citizens to participate in economic activities for a sustainable boosting of consumption.