(LEAD) Income gap narrows in 2020 thanks to emergency cash distributions

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By Kim Soo-yeon

SEOUL, Dec. 16 (Yonhap) – The income gap between haves and have-nots in South Korea narrowed in 2020 compared to the previous year thanks to the government providing emergency cash distributions to the middle pandemic, data showed Thursday.

The disposable income distribution ratio, a key barometer of income equality, reached 5.85 last year, up from 6.25 the year before, according to Statistics Korea data. A higher ratio means greater inequality in the distribution of income.

The reading means that the top 20 percent income bracket had 5.85 times more income than the bottom 20 percent last year.

The drop came as the provision of a record level of pandemic relief funds boosted households’ public transfer income, helping to improve their overall outcome.

In May 2020, the government distributed 14.3 trillion won ($ 12.1 billion) in stimulus checks to all households to help them cope with the fallout from the pandemic. Households with four or more members received 1 million won per household.

The proportion of income earned through public transfers accounted for 72% of the annual gain in household income last year, the statistics agency said.

The Gini coefficient measured with disposable income, another indicator of income inequality, hit a record high of 0.331 last year, down from 0.339 the year before.

A reading of zero signifies complete income equality, while larger numbers close to one indicate a growing income gap between the rich and the poor.

But when the Gini coefficient is measured with income from wages and business operations, income inequality has worsened over the past year as the labor market has remained sluggish due to the pandemic.

State financial support helped improve income disparities in South Korea last year, even as the COVID-19 pandemic deepened social polarization and resulted in an uneven recovery between sectors.

Data showed that South Korean households earned 61.25 million won on average last year, up 3.4 percent from the previous year.

Their salary income grew 1.7% year-on-year to 38.55 million won. But household public transfer income jumped 31.7 percent to 6.02 million won, as the government provided emergency cash distributions.

The bottom 20 percent income bracket earned an average of 12.94 million won last year, up 12 percent from the previous year. Income earned from public transfers represented 47.1 percent of total income by income group.

The wealthiest 20% group saw their average income reach 142.1 million won last year, up 2.2% from a year ago.

Meanwhile, average Korean household assets have exceeded 500 million won due to soaring house prices.

Households held an average of 525.3 million won at the end of March, up 12.8% from the previous year. This is the fastest annual gain since 2011, when the agency began compiling related data.

The government unveiled a package of measures to curb rising house prices, including tax hikes and loan regulations. But this move largely led to a near-term slowdown, as home buying demand remained strong in anticipation of further price hikes.

Average Korean household debt stood at 88.01 million won at the end of March, up 6.6 percent from a year earlier, the data showed.

The increase in debt is mainly due to more households taking out loans to buy homes or finance the costs of rental properties and to invest in stocks.

Korean households had an average financial debt of 65.18 million won, up 7.7% from the previous year.

South Korean household debt has been repeatedly cited as the main drag on Asia’s fourth-largest economy, as there are concerns that high household indebtedness will dampen domestic demand and thus dampen economic growth.

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