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Report shows income growth, reduced spending

Despite continued annual growth in incomes in 2012, household spending lagged.

According to a report by Statistics Korea and the Ministry of Strategy and Finance yesterday, households’ monthly income averaged 4.08 million won ($3,745) last year, up 6.1 percent from 3.84 million won in 2011.

It was the highest growth since the 5.8 percent year-on-year gain in 2003.

Real growth, adjusted for inflation, of household incomes also rose 3.8 percent over the same period.

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“The overall increase in household income is attributed to a growing number of employed Koreans owing to improving labor market conditions and an increased percentage of full-time workers,” the report said.

“The latest figures proved that one of the most effective ways to distribute income equally is creating jobs,” said Lee Hyung-il, a director at the Economic Policy Bureau of the Finance Ministry.

Last year, the country’s unemployment rate stood at 3.2 percent, down from 3.4 percent in 2011, with an average of 437,000 jobs added compared with a year earlier.

Household spending also rose, but at a slower pace than income.

The average monthly expenditure went up 3.3 percent to 3.22 million won in 2012 from a year earlier. The inflation-adjusted figure stood at 1 percent.

Monthly consumption expenditure rose 2.7 percent to 2.46 million won. Expenditure on telecommunications, entertainment and cultural affairs jumped an average of 5 percent, and spending on food, transportation and health care 1 to 2 percent. Education expenditures fell 2 percent.

The Finance Ministry said consumption expenditures rose in the fourth quarter last year, owing to increased purchases of automobiles as the government lowered consumption taxes for new cars.

Non-consumption expenditure, including payments on taxes, pensions and insurance, also expanded 5.1 percent year-on-year to 76,000 won per household, the report showed.

The average disposable income of Korean households hit a new high of 3.32 million won since 2003.

The average surplus of households, subtracting expenditures from the income, reached 860,000 won, marking double-digit growth for the first time since 2003. The ratio of surplus to disposable income also rose 2.6 percentage points, recording the largest expansion since then.

By Song Su-hyun [ssh@joongang.co.kr]