Engel’s Coefficient for S. Korea Jumps After Pandemic | Be Korea-savvy

Engel’s Coefficient for S. Korea Jumps After Pandemic

A customers shops for groceries at a discount store in Seoul. (Yonhap)

A customers shops for groceries at a discount store in Seoul. (Yonhap)

SEOUL, Feb. 17 (Korea Bizwire)South Korea’s Engel’s coefficient jumped in the post-pandemic era far higher than in other major countries, indicating that low-income earners are struggling more financially in relative terms, a private think tank said Thursday.

The Korea Economic Research Institute (KERI) reported that the Engel’s coefficient for the Asia’s fourth-largest economy was 12.8 percent in 2021, up by 1.4 percentage points from 2019, immediately prior to the coronavirus outbreak.

The jump was higher than the G5 countries’ average (0.9 percentage points) over the same period.

The report attributed the jump to soaring food prices in South Korea.

The U.N. Food and Agriculture Organization (FAO) reported the increase rate of food prices in South Korea between 2020 and 2021 was 5.2 percent per year, which was more than three times the G5 average (1.7 percent).

The KERI also blamed stagnating household consumption as a reason for the rise of the Engel’s coefficient, which signals that households are cutting unnecessary consumption while raising expenditures on food, which is the most essential of all other forms of consumption.

In fact, the percentage of expenditures on food was 10.7 percent in the fourth quarter of the year 2021, up by 0.8 percentage points from the fourth quarter of 2019.

Over the same period, other forms of expenditure like spending on cars (-0.9 percentage points), clothes and shoes (-0.4 percentage points) and communication devices (-0.2 percentage points) dropped.

The decrease in disposable income, following rising food prices in the post-pandemic era, was 5.7 percent among low-income earners, which was 4.8 times higher than among high-income earners.

Ashley Song (ashley@koreabizwire.com)

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