Income Distribution Worsens amid COVID-19 Outbreak

Neither public sector jobs nor the government’s disaster recovery allowances could prevent the polarization of income triggered by the new coronavirus crisis.

In the first quarter, earned income of the bottom 60 percent of households fell all at once and household consumption expenditures fell most sharply in history. The government asserts that it successfully prevented a decline in the economic growth rate with its income-driven growth policy. Yet the COVID-19 outbreak dealt a direct blow to ordinary people, causing concerns that the imbalance in income distribution will gradually deteriorate.


Earned income of the households in the first (lower 20 percent), second and third quintiles stood at 513,000 won, 1,741,000 won and 2,780,000 won, respectively, dropping 3.3 percent, 2.5 percent, and 4.2 percent from a year ago, according to the Household Income Trends in the First Quarter of 2020 published by Statistics Korea on May 21.

The simultaneous decrease in the first, second and third quintiles’ earned income took place for the first time in three years since the first quarter of 2017. It is seen as a result of an unemployment shock to the marginalized. The average monthly nominal income of the first quintile remained unchanged at 1,498,000 won, while that of the fifth quintile increased 6.3 percent on year to 11,158,000 won.

Accordingly, the disposable income of the top 20 percent (households with two or more members) was 5.41 times more than that of the bottom 20 percent, which was higher than the 5.1 times a year ago. However, thanks to an increase in transfer income, such as basic pensions paid by the government, the average monthly income of all households with two or more people nationwide amounted to 5,358,000 won, a 3.7 percent increase over the previous year.

Amid social distancing put in place due to the spread of the novel coronavirus, households tightened their belts, in particular spending for food, accommodation, and education. The average monthly nominal consumption expenditure per household (two or more people) nationwide was 2,878,000 won, a drop of 6.0 percent from the same period of 2019. It was the largest drop since the compilation of related statistics began in 2003. In particular, consumption expenditure by households in the first quintile averaged 1,486,000 won per month, down 10.0 percent from a year ago.

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