Disposable income for bottom 10% plummets in Q3

In the third quarter of the year, the disposable income of the bottom 10 percent households has shown the biggest fall since the relevant statistics were first compiled in 2003. By contrast, the disposable income of the top 10 percent population posted the steepest growth this year. Experts point out that the prolonged economic downturn and restructuring are worsening income disparity.

According to the announcement of Statistics Korea on Monday, the monthly average disposable income of the lowest income bracket (bottom 10 percent) stood at 717,000 won (610 U.S. dollars) in the third quarter of 2016. The figure has dropped by 16 percent year-on-year. Disposable income refers to the total amount of income minus non-consumption expenditure such as taxes, social insurance fees, and interest payments.

Disposable income had been showing signs of gradual growth but began to decrease starting this year. The disposable income of the bottom 10 percent households increased by around 10 percent quarter by quarter, starting in the fourth quarter of 2013. In the first quarter this year, however, it decreased by 4.8 percent, the fall grew bigger to 13.3 percent and 16.0 percent in the second and third quarter, respectively.

The sharp downturn in income can be attributed to the plummeting labor and business incomes stemming from economic recession. In the third quarter, labor income for the bottom 10 percent population dipped by 25.8 percent, the biggest fall ever. The falling number of temporary workers dealt the hardest blow. The number of temporary workers had increased steadily since the second quarter of last year, but it went down by 7.8 percent and 6.5 percent in the first and second quarter this year, respectively.

Business income for the lowest-income bracket families dropped 16.8 percent during the same period. The prolonged recession has taken a toll on small-sized business owners. This is in turn threatening job security of temporary workers who are in the food and accommodations services.

“Wage workers are getting impoverished, facing the aftermath from the massive layoffs in shipbuilding and shipping industries, and temporary workers and day laborers working for the subcontractors are getting the heat directly,” said Kim Gwang-gi, a professor of social education at Kyungpook National University. “It appears that income disparity will continue to worsen for a while.”

Min-Woo Park minwoo@donga.com