Oil and good prices are rising fast. According to Korea National Oil Corporation on Monday, domestic gasoline prices have risen for 13 consecutive weeks to reach 1,463.2 won per liter. Food prices, such as bread, tofu, and instant rice, which are closely related to the livelihood of the public, have also increased recently by 7-14% driven by spike in crude oil and grain prices in the international market. Adding to the drop in incomes and the number of jobs, soaring inflation is taking a toll on people’s lives. Ordinary people, who have already become COVID-19’s biggest victims, are struggling to put food on the table.
West Texas Intermediate (WTI) crude oil prices have risen by almost 20% in the past year. The prices of soybean, corn, and wheat have been up by almost 40% in a year on the Chicago Board of Trade (CBOT). Local experts predict that this upward trend will continue for a long time due to an increase in global liquidity. International raw material and grain prices are said to drive up domestic prices with a lag of three weeks to six months.
Domestic prices appear to be stable on the surface. The benchmark consumer-price index gained only 0.6% in January from a year earlier. Experts, however, point out that a plunge in travel and accommodation prices resulting from the COVID-19 crisis is creating an illusion that overall prices have remained stable. Because the consumption of groceries at home has increased greatly due to continuing social distancing, it should be viewed that consumer prices have risen considerably.
The most serious problem is the livelihoods of people. The earned income of households in the bottom 20% income bracket fell 13.2% in the fourth quarter of last year. A drop in the number of daily and temporary jobs has taken a toll on the low income bracket. While the employment index is at its worst, there are a whopping 4.38 million people who are not classified as the unemployed in statistics, such as those “taking a break from work for no reason, temporarily taking a break, or gave up the search for work.” Most of them are in the low-income bracket, such as daily workers and small business owners.
The prices of goods as well as power and utility bills are expected to rise as well given the increasing raw material prices. If inflation occurs, rise in interest rates is inevitable and it could worsen the debt burden of people. The government should not only look at the price index, which is in the 0% range, but closely examine the price of items and bills that are related to the livelihoods of people. Furthermore, it should reconsider doling out COVID-19 compensation considering the circumstances. Whether it is handouts or compensation, the government should focus the resources on those most in need and remove all systems and practices that hinder job creation and reduce economic vitality.