In the second quarter of this year, the average monthly income per household fell for the first time in four years. Earnings from work and business increased slightly, but this year's income decreased relatively due to the base effect of the national disaster relief payment in May last year to household income in the second quarter of last year. However, even in this situation, the top 20% showed an increase in income this year. Gyeonggi Province Governor Lee Jae-myung has been insisting on 100% of the national disaster relief payment every day, but in the end, it has been proven that the disaster aid payment has no effect to stimulate consumption.
According to the 'Household Trend Survey Results' released by the National Statistical Office on the 19th, the average monthly income of households with one or more members nationwide in the second quarter of this year was 4.28 million won, down 0.7% from the same period of the previous year. It is the first time in four years since the second quarter of 2017 (-0.5%) that household income declined on a quarterly basis.
The decrease in household income in the second quarter is largely due to a decrease in total income as transfer income, which increased significantly following the payment of national disaster relief funds in May last year, decreased this year. In the second quarter, public transfer income including disaster subsidies was 420,000 won, down 37.1% from the previous year, the biggest decline since the first quarter of 2006 when related statistics were released. In the second quarter, earned income rose 6.5% to 2.74 million won, while business income rose 3.6% to 800,000 won.
Jeong Dong-myeong, director of social statistics at Statistics Korea, explained, "Even though earned income and business income increased simultaneously due to strong employment and improved self-employment conditions in the second quarter, public transfer income fell sharply due to the base effect of the nationwide disaster aid last year."
Although household income declined significantly, the average monthly consumption expenditure per household in the second quarter was 2.47 million won, up 3.8% from the second quarter of last year. Education expenses (31.1%) increased sharply as private education, which had been greatly contracted by the COVID-19 outbreak last year, normalized.
Although overall household income decreased, when looking at the income by quintile, which divided household income into five categories, only the top 20% of the wealthy increased their monthly average income by 1.4%. In the same way, even though the effect of the national disaster subsidy has disappeared, only the top 20% have increased their income again. This is because the share of transfer income in total income was insignificant because the income of the top 20% was so large. Looking at the proportion of public transfer income that includes disaster aid by income decile, the proportion of public transfer income (440,000 won) was so absolute that of the total income of 960,000 won in the first decile, the bottom 20%, in the second quarter of this year reached half (45%). The share of public transfer income (420,000 won) was only 4.5% of the total income of 9.24 million won in the top 20% of the quintile.
Kim Mi-ru, a research fellow at the Knowledge Economy Research Department at the Korea Development Institute (KDI), said, “The results of this household trend survey can provide sufficient evidence that selective support is correct. "It is appropriate to selectively pay only in cases where there is a significant impediment to conducting business," he said.
In the process of preparing the second supplementary budget this year, Hong Nam-ki, Deputy Prime Minister and Minister of Strategy and Finance, carried out the government's opinion by selectively providing disaster aid to 88% of the people against the political powers. However, the governor has announced that it will provide subsidies from its own resources to the remaining 12% who do not receive government subsidies.
As the effect of the disaster aid disappeared this year, the distribution worsened even more. The equivalised disposable income quintile ratio, an index comparing the disposable income between the bottom 20% and the top 20%, was 5.59 times in the second quarter, higher than 5.03 times last year. This means that the income gap between the upper and lower classes has widened.
In the end, it is pointed out that cash disaster relief is not a fundamental solution, and the side effect of only increasing income gap and deprivation in the future is not formidable.