As the consumer price index rose to over 3% in the second quarter, households in the lowest income bracket, the bottom 20%, are spending two-thirds of their income on food, housing, and medical expenses. Despite an increase in income due to government support for high fuel prices, these households are spending about 280,000 won more than they earn each month.
According to the National Data Agency's "2026 Second Quarter Household Trend Survey" released on the 27th, the average disposable income for the bottom 20% of households was 1,094,000 won, a 7.5% increase from the same period last year. However, their average monthly consumption expenditure rose to 1,372,000 won, resulting in an average deficit of 277,000 won.
The trend of spending exceeding income continues. The average consumption propensity for the bottom 20% was 125.3%, meaning they spent 1,253,000 won for every 1,000,000 won of disposable income. Although this figure decreased by 2.7 percentage points from the previous year, it still indicates that income alone is insufficient to cover expenses.
Notably, essential expenditures have increased significantly. The average monthly spending on food and non-alcoholic beverages for the bottom 20% was 289,000 won, up 1.0% from the previous year, while housing, water, and heating costs rose by 6.5% to 270,000 won.
Spending on food and accommodation increased by 15.0% to 187,000 won, and health expenditures rose by 13.5% to 167,000 won. Together, these four categories accounted for 913,000 won, or 66.5% of total consumption expenditure. Food and housing alone made up 40.8% of total spending.
As living costs rise, other expenditures have decreased. Spending on education fell by 21.2% compared to the previous year, while entertainment and cultural expenses dropped by 8.7%. Communication costs also decreased by 5.1%. This suggests that households are prioritizing essential expenses, leaving less room for education and cultural activities.
Income growth has largely been driven by government support and pensions rather than earnings from work or business. Of the average monthly income of 1,283,000 won for the bottom 20%, transfer income accounted for 897,000 won, or about 70%. Earnings from work were only 233,000 won, and business income was just 129,000 won.
Among transfer income, public transfer income, which includes pensions and social benefits, was 694,000 won, an 11.6% increase from the previous year.
Park Soon-ok, head of the National Data Agency's Household Financial Trends Division, noted that the government support for high fuel prices, which began in April, contributed to the increase in public transfer income. However, she cautioned that the support is based on health insurance premiums and does not perfectly align with the income brackets used in the household trend survey.
The disparity in consumption capacity between low-income and high-income households is stark. The top 20% of earners reported an average monthly surplus of 3,422,000 won, while the bottom 20% recorded a deficit of 277,000 won. The average consumption propensity for the top 20% was 60.3%, about half that of the bottom 20%. Even with government support increasing low-income households' income, it has not been sufficient to alleviate the burden of living costs such as food and housing.
Additionally, on the same day, the Bank of Korea's Monetary Policy Committee raised the base interest rate from 2.75% to 3.0%, raising concerns that low-income households with variable-rate loans may face increased financial burdens. Given that a significant portion of their expenses is on necessities like food and housing, there is a high likelihood that they will either cut back on discretionary spending for education and culture or further increase their deficits to manage the higher interest payments.
Particularly, while interest rate increases are reflected relatively quickly, the effects of price stabilization take time to materialize, raising concerns that high prices and interest burdens could further pressure the consumption capacity of vulnerable groups.
* This article has been translated by AI.
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