SEOUL, August 27 (AJP) - South Korea's richest households pocketed much larger income gains in cash terms than those at the bottom in the second quarter, widening the absolute income gap even as workers suffered a third straight month of falling inflation-adjusted wages.
Average monthly household income rose 4.5 percent from a year earlier to 5.30 million won in the April-June period, according to the Ministry of Data and Statistics' quarterly household survey released Thursday.
After adjusting for inflation, household income increased a much smaller 1.5 percent. Labor income, which accounts for the largest share of household earnings, rose only 0.8 percent to 3.22 million won, while transfer income surged 20.4 percent to 931,000 won. Public transfers alone jumped 27.6 percent.
The headline increase also concealed a striking difference in the amount of additional income flowing to households at opposite ends of the income ladder.
Average monthly income for households in the richest 20 percent rose to 11.15 million won from 10.74 million won a year earlier, an increase of about 407,000 won.
Income for the poorest 20 percent climbed to 1.28 million won from 1.19 million won, an increase of about 89,000 won.
The richest households therefore gained more than four times as much additional monthly income in won terms as the poorest households.
The absolute gap between the two groups widened by about 318,000 won to 9.87 million won from 9.55 million won a year earlier.
Income at the bottom rose at a faster percentage rate of 7.5 percent, compared with 3.8 percent for the top quintile, helped substantially by transfer payments, or government handout.
The government's broader distribution indicator also pointed to an improvement rather than deterioration. The ratio of equivalized disposable income of the top 20 percent to the bottom 20 percent fell to 4.97 in the second quarter from 5.45 a year earlier.
For workers dependent primarily on wages, however, purchasing power continued to deteriorate.
South Korean workers saw their inflation-adjusted wages decline for a third consecutive month in June as stubbornly high prices erased modest pay gains, according to a separate Ministry of Employment and Labor survey released Thursday.
Real monthly wages for workers at businesses with at least one regular employee slipped 0.1 percent from a year earlier to 3.41 million won in June.
The three-month slide was the longest since real wages declined for five consecutive months from April through August 2023.
The squeeze was more pronounced over the full second quarter. Real wages fell 0.8 percent to 3.37 million won even though nominal wages increased 2.1 percent to 4.04 million won.
Consumer prices rose 3.0 percent over the same period, outpacing the increase in pay.
The two sets of government data illustrate the divergence between rising headline household income and the weaker experience of workers relying on their paychecks.
Much of the household-income increase came from transfers rather than wages, while inflation continued to erode the purchasing power of earned income.
On the upside, household spending rose 3.0 percent from a year earlier to 3.99 million won per month in the second quarter. Consumer spending increased 3.4 percent in nominal terms but only 0.4 percent after adjusting for inflation.
Higher borrowing costs continued to weigh on household budgets. Interest expenses climbed 12.1 percent from a year earlier, the household survey showed.
AJP Takeaways
- South Korea's richest 20 percent gained about 407,000 won in monthly household income from a year earlier, versus about 89,000 won for the poorest 20 percent, widening the absolute top-bottom income gap to roughly 9.87 million won.
- The relative income picture was less unequal: bottom-quintile income rose 7.5 percent versus 3.8 percent for the top quintile, while the official equivalized disposable-income quintile ratio narrowed to 4.97 from 5.45.
- Workers' real wages fell for a third consecutive month in June and dropped 0.8 percent in the second quarter as 3.0 percent inflation outpaced a 2.1 percent rise in nominal pay.
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