SEOUL, Dec. 16 (Korea Bizwire) – The income gap between the haves and have-nots in South Korea narrowed in 2020 from a year earlier on the back of the government’s provision of emergency cash handouts amid the pandemic, data showed Thursday.
The distribution ratio for disposable income, a key barometer of income equality, reached 5.85 last year, down from 6.25 the previous year, according to the data from Statistics Korea. A higher ratio means increased inequality in income distribution.
The reading means the top 20 percent income bracket had 5.85 times more earnings than those in the bottom 20 percent last year.
The fall came as the provision of a record high of pandemic relief funds jacked up households’ public transfer income, helping improving their overall bottom line.
In May 2020, the government doled out 14.3 trillion won (US$12.1 billion) in stimulus checks to all households to help them cope with the fallout of the pandemic. Households with four or more members received 1 million won per home.
The proportion of income earned through public transfer accounted for 72 percent of last year’s on-year gain in household income, the statistics agency said.
The Gini coefficient measured with disposable income, another gauge of income inequality, came in at a record low of 0.331 last year, down from 0.339 the previous year.
A reading of zero means complete income equality, while higher numbers nearing one indicate a widening gap in earnings between the rich and poor.
But when the Gini coefficient is measured with income earned through wages and business operations, income inequality worsened last year as the job market remained sluggish due to the pandemic.
State financial support helped improve income disparity in South Korea last year even though the COVID-19 pandemic has deepened social polarization and brought about an uneven recovery across sectors.
The data showed South Korean households earned 61.25 million won on average last year, up 3.4 percent from a year earlier.
Their income earned through wages rose 1.7 percent on-year to 38.55 million won. But households’ public transfer income jumped 31.7 percent to 6.02 million won, as the government provided emergency cash handouts.
The bottom 20 percent income bracket earned an average of 12.94 million won last year, up 12 percent from the previous year. Income earned through public transfers accounted for 47.1 percent of the total earnings by the income group.
The top 20 percent income group saw its average income reach 142.1 million won last year, up 2.2 percent from a year ago.
Meanwhile, the average assets of Korean households exceeded 500 million won due to skyrocketing housing prices.
Households held an average of 525.3 million won as of end-March, up 12.8 percent from a year earlier. It marked the fastest on-year gain since 2011, when the agency began compiling related data.
The government has unveiled a set of measures to curb rising home prices, including tax hikes and lending regulations. But the move largely led to a short-term letup as demand for home buying remained strong in anticipation of further price hikes.
The average debt by Korean households amounted to 88.01 million won as of end-March, up 6.6 percent from a year earlier, the data showed.
The rise in debt mainly came as more households took out loans to buy homes or finance the costs for properties on lease and to invest in stocks.
Korean households had average financial debt of 65.18 million won, up 7.7 percent from the previous year.
South Korea’s household debt has been repeatedly cited as the main drag on Asia’s fourth-largest economy, as households’ high indebtedness is feared to curb domestic demand and thus crimp economic growth.