Watch out, one-man households

The share of single-person households in Korea is rising rapidly. As of 2010, they replaced four-person households as the largest household group. In 2012, 25 percent Korean households were people living alone and if the current pace continues, single-person households will constitute one-third of the nation’s homes by 2035, according to Statistics Korea. Along with their swelling number, single-person households are expanding their influence and share in the economy. In 2012, they accounted for 9 percent of total household spending, rising from 6 percent in 2006.

As a growing consumer group, the economic effects of single-person households need to be assessed. Specifically, three characteristics of single-person households emerge in terms of demographics, income and consumption.

In 2010, men in their 40s and 50s accounted for 16 percent of the single population, an increase of 5 percentage points from 2000. The main cause is marital. Between 2000 and 2010, the share of unmarried middle-aged men who form single-person households increased 3 percentage points and accounted for three-fourths of the total number of male single-person households. During the same period, the share of households of divorced middle-aged men increased almost 2 percentage points.

In terms of income, single-person households are struggling to recover from the global financial crisis, which has pushed them farther behind two-person-plus households in real disposable income. From 2007 to 2012, the yearly average growth rate for single-person households’ real disposable income was a miniscule 0.3 percent, far short of two-person-plus households’ 1 percent (equivalent income). And the monthly average real disposable income of single-person households was just 65 percent of that of larger households in 2012.

The income gap is caused by disparities at both ends of the single-person household population - those in their 20s and 30s, and people more than 70 years old (together, they form two-thirds of the single-person household population). Fragile economic growth since the global financial crisis has severely retarded the current and future incomes of young adults, who derive 90 percent of their income from salaries. As for the elderly, they are almost totally dependent on income transfers. Their income level is low with little growth. Only those in their 40s and 50s, a growing but still relatively small portion of the single household population, saw income increases that exceeded two-person-plus households.

Finally, in spending, the average propensity to consume (APC) is on an upward trend among single-person households, in contrast to two-person-plus households, who are reining in their spending. This is a reflection of the generally low income level of single-person households and their disproportional share spent on essentials such as food and housing. Their income growth is unable to outpace spending on necessities, which fuels the rise in APC.

Single-person households comprised of senior citizens aged 60-plus have had the highest and fastest-rising levels of APC. In 2011, the APC of single-person households of those in their 70s and above and those in their 60s marked 101 percent and 100 percent, respectively, recording the highest of all age groups.

Furthermore, the youngest and oldest age groups recorded the largest increases in spending per household during the 2006-11 period, 13.8 percentage points for the former and 11 percentage points for the latter. Those under the age of 39 have not shown a willingness to curb their appetite despite their low income. Their discretionary spending on communications, entertainment, culture and other non-essentials are on a steady upward trajectory. On the other hand, single-person households of those in their 40s whose income level is relatively high recorded a stable APC level of 70 percent.

As such, those households with a ballooning APC number deserve our attention, with a customized approach for each age group. For example, to satisfy the needs of the relatively well-off middle-aged single-person households, more luxury products and services to prepare for old age must be developed. On the other hand, affordable, convenient and practical products that will fulfill the needs of single-person households, both young and old, are also in urgent need.

*The author is research fellow at Samsung Economic Research Institute.

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By Lee Eun-mi