Skip the rhetoric
Korea’s household incomes grew 1.6 percent last year, the slowest rate since 1.2 percent in 2009, which was the worst point in a global financial crisis. When counting in inflation, real income growth didn’t get above 0.9 percent last year. The growth that was seen was mostly from increases in pensions. Real incomes were, in fact, stalled or reduced from the previous year.
Consumption cannot be expected to pick up when incomes are stagnating. Average spending by a household of more than two people rose 0.5 percent in nominal terms last year, but when inflation is factored in, it declined 0.2 percent from the previous year. Meanwhile, housing costs due to spikes in rents, rose along with taxes and social premiums paid to the state.
The data explains why business and everyday people aren’t feeling too good these days. For the people, a real income gain of 0.9 percent is more meaningful than last year’s gross domestic product growth of 2.6 percent. But it is wishful thinking to hope for recovery in domestic demand. Lives are becoming harder and harder with rising housing and education expenses on top of savings for old age. It is important to pave the way for the growth to translate into income increases and to accelerate the slow-moving economy.
Chairing an economic advisory meeting last week, President Park Geun-hye pointed out that without improvement in employment rates, people won’t feel any improvement even if some economic stats get better. She ordered the government to concentrate on raising employment. But we have heard this before.
Former deputy prime minister for the economy Choi Kyung-han pledged to boost household incomes but registered no improvement in his 18 months on the job. The government employed makeshift measures such as tax tweaks. The opposition party that promises income-oriented growth has also failed to offer detailed and feasible action plans. What the Korean economy desperately needs is real actions to help people bring home more money. JoongAng Ilbo, Feb. 27, Page 26