Twenty-seven Percent of Korean Households are in the Red

The situation for the households of salaried workers is becoming gloomier. Their wages have only slightly increased, while taxes, the national pension, medical insurance fees, and other expenses stipulated by law are soaring. Hence, the increased rate of real consumption, which takes into consideration the fluctuation of prices, has declined for the first time in a year and a half.

According to the National Statistical Office (NSO) report on household spending of this year’s second quarter (between April and June), the national average wage of an urban worker household was a monthly 2.971 million won, which is a five percent increase when compared to the same period last year. The monthly spending average increased by 3.7 percent, placing it at 2.317 million won.

Nevertheless, when considering the rise of prices, the increased rate of real wages is barely 1.6 percent. In addition, real spending has decreased by 0.8 percent, turning negative in a year and a half since the fourth quarter (between October and December) of 2002.

In contrast, the amount of taxes paid averaged 97,000 won monthly, which is a 10.2 percent spike compared to the same period in 2003. Public pensions such as the national pension and retirement funds, and social insurance fees such as medical and employment insurance fees, have jumped 8.0 percent and 7.0 percent each, respectively.

In all, the national average household’s amount of taxes soared by 18.2 percent, public pensions rose by 9.3 percent, and social insurance fees rose by 7.4 percent.

The NSO analyzed that in the case of taxes, they rose due to the sharp hike in the number of registered automobiles and the increase in transfer income taxes. The burden of public pensions was augmented because the number of people subject to the national pension greatly increased.

As a result, consumption is shrinking because there are no significant gains in wages while legally mandated expenses are on the rise. In a national average household, with the exception of the consumption of groceries, which has increased by 7.5 percent, and some other articles, most other expenses such as education, which increased by 0.1 percent, and furnishing, which decreased by 6.3 percent, are either in a standstill or on the decrease.

The average wage of the top 20 percent of households is 6.83 times that of the bottom 20 percent, which is an improvement from 7.14 times over the same period last year, but still a high figure.

According to the NSO, 27.7 percent of Korean households are in the red. In particular, 50.3 percent of the households in the bottom 30 percent are living in the red. Nevertheless, this is a slight improvement from last year’s figures of 28.1 percent and 51.1 percent, respectively.

Jong sik Kong kong@donga.com