SEJONG, Feb. 13 – South Korean household income grew 3.4 percent on-year in 2014 as more people found employment, but consumption lagged behind income growth, a government report showed Friday.
According to the report by Statistics Korea, the monthly income of households with two members or more stood at an average of 4.3 million won (US$3,875) last year, up from 4.16 million won in the year before.
Inflation-adjusted household income also moved up 2.1 percent over the same period.
The report attributed the increase to more people joining the workforce that resulted in better earnings by household members. It claimed the faster pace of growth compared with the previous year contributed to the rise in income.
The government said some 530,000 new jobs were created last year compared with 440,000 for 2013. The country is estimated to have grown 3.4 percent vis-a-vis 3 percent growth confirmed for 2013.
The report showed that households’ earned income increased 3.9 percent on-year to a monthly average of 2.87 million won. Households’ business-related income rose 0.5 percent to 862,200 won.
“The rise in earned income was the single largest factor for last year’s income increase,” an official at the statistics agency said.
She said household spending likewise increased 2.8 percent to 2.55 million won, with the pace of growth accelerating from 0.9 percent in 2013.
On the other hand, while spending outpaced income growth in 2013, the reverse happened last year, which may be related to developments like the sinking of the Sewol ferry in April that seriously sapped private consumption, the official said.
The findings showed people spending more on transportation and recreation and other services, while cutting back on telecommunication, housing and utilities.
Transportation outlays were buoyed by more people buying cars, while utilities were affected by lower energy prices.
On non-consumption expenditures, which reached 805,000 won, the total rose 3 percent on-year from a gain of 2.8 percent in 2013. Outlays in this field include taxes, pensions and insurance.
The report showed that households’ monthly disposable income — total income minus non-consumption spending — stood at just under 3.50 million won, up 3.5 percent from a year earlier. In 2013, disposable income grew 1.9 percent.
The average monthly surplus for a household stood at 947,000 won, a solid gain of 5.2 percent on-year.
The report, on the other hand, showed the numbers for households’ “average consumption propensity” — the ratio of total consumption spending to disposable income — dropped to 72.9 percent, a 0.4 percentage difference from the previous year. This marks the fourth year in a row that it contracted compared to the year before. Last year’s numbers were the lowest reached since corresponding figures were tallied from 2003 onwards.
The low numbers are a sign that people are withholding spending, despite a rise in earnings, with the statistical office saying that the trend is related to the rapid aging of the South Korean society that is causing manly elderly citizens to cut back on consumption.
For the fourth quarter, average household income stood at 4.26 million won, up 2.4 percent from the year before, with expenditures edging up 0.9 percent to 2.5 million won. Non-consumption spending reached 761,000 won with disposable income standing at a little over 3.5 million won, for a gain of 2.9 percent on-year.
The monthly household surplus reached 997,000 won, a 8.3 percent spike from the year before.
On the latest report, the finance ministry said while a more extensive survey due out in May will shed greater light on household earnings, last year’s figures showed a steady rise in income, particularly among the lower 20 percent of the population. May figures will incorporate single person households and those in farming and fishing communities.
“Income gains among the bottom 20 percent bolstered by state welfare spending and pensions rose 5.6 percent on-year, which is higher than the overall average,” the ministry said in a press release.
It said this gain reduced the equivalent disposable income (EDI) to 4.45, the lowest since 2004.
EDI is the total income of a household, after tax and other deductions, available for spending that also takes into account the number of household members. This is used to measure wealth disparity between different income groups with lower numbers meaning less disparity. (Yonhap)