Earned Income Tax Upper-Level 20 Percent, Lower Level 20 Percent, 5.5 Times Difference

Difference in taxation among wage earning families in urban settings is showing greater inequality.

Furthermore, the rate of increase in consumption is found to be lower than increase in wages. Also, spending on health insurance and taxes has increased greatly so that provisional income rose short of nominal income.

The National Statistical Office (NSO) announced on November 23 that a survey of 5200 families in the city area showed that the monthly wage earnings per family was 2,734,900 won in the 3-4 quarter, rising 12.0 percent from last year. This is the highest increase since the 3-4 quarter (14.1percent) of 1996 five years ago.

The top 20 percent wage earning families whose wages totaled an average of 5,530,000 won per month recorded a 15.2 percent increase, while the 20 percent lower-level earners with 1,006,000 won recorded an increase of 8.9 percent.

The five levels of earners divided into top 20 percent and lower 20 percent increased the multiplication rate from 5.19 to 5.50. This is higher than the x5.04 of the 2-4 quarter which indicates a greater inequality in income distribution.

Of particular significance is the fact that the top 10 percent`s monthly average income of 6,894,000 won recorded a 17.3 percent increase while the lower 10 percent stopped short of 765,000 won, an increase of 8.8 percent. The gap has increased from x8.47 to x9.13.

The NSO reported that the rate of increase in wage earnings stopped at 10.0 percent in the 3-4 quarter while business and auxiliary income (15.6 percent), property income (13.6 percent), and transferred income (32.8 percent) increased greatly, creating a greater gap in income distribution.

The rate of consumption per family increased 11.0 percent (2,078,700 won) in the 3-4 quarter, less than the rate of increase in earnings. Provisional income after taxes rose 11.9 percent (2,438,600 won) and the family income after consumption expenses rose from 57,700 won to 656,100 won, a 15.0 percent increase.

The average consumption index (consumption expenditure divided by provisional income) for this year came out to be 73.1 percent, 0.7 points less than the same period last year, 3.8 percent lower than last quarter, and the lowest since 3-4 quarter of 1999 (73.1 percent).

Chan-Sun Hong hcs@donga.com