ED Pandemic's dark side

COVID-19 relief should focus on low-income groups

The share of households in debt stood at 24.4 percent during the second quarter, up 4.4 percentage points from a year earlier, according to the Korea Statistical Information Service (KOSIS), a portal of Statistics Korea. This figure means that a quarter of Korean households saw their spending exceed their disposable income ― or their income minus their non-consumption expenses, such as taxes and insurance fees. In particular, the ratio of households in debt in the bottom 20 percent of the income bracket jumped to 55.3 percent, up from 47.1 percent a year before.

The reason for this situation is simple: Income has declined, but spending has increased, mainly due to surging consumer prices. Although the poorest 20 percent of households spent less money on food and non-alcoholic beverages, these costs account for a greater proportion of their income than that of wealthier households, as they have borne the brunt of growing inflationary pressure. Small business owners also have been trudging onwards through hardship. The number of the self-employed who are juggling two jobs totaled 155,000 on July 31, up 17.4 percent from 132,000 a year ago. Driven to the brink of going out of business due to the tighter social distancing measures, but unable to close their shops, they have barely stayed afloat by taking on additional jobs, such as working as delivery people or designated drivers.

The pandemic's dark side is likely to get even darker for the time being, because the fourth wave of COVID-19 infections will have a more painful impact on the self-employed and low-income people. For the next two weeks, business hours will be cut shorter by one hour to 9 p.m. Unless the number of new virus cases falls sharply, any relaxation of the social distancing measures is hard to expect. The government says it will compensate for the losses of business owner-operators, but the amount allocated so far in the budget is far from sufficient. Worse yet, banks are now reducing loans for individuals, aggravating their financial pinch.

In this situation, COVID-19 relief funds for all Koreans should be made out of the question. Instead, the government should allocate its limited resources to the people most vulnerable to the fallout from the pandemic. The efficient allocation of financial resources is now imperative to stabilize the livelihoods of vulnerable low-income people and concomitantly to narrow the widening wealth and income gaps.