Household income surplus surges as people cut spending

South Korea’s household income surplus increased sharply last year as people tightened their belts to weather the protracted economic slowdown triggered by the COVID-19 pandemic, data showed Monday.

The nation’s household income surplus rate posted 32.9 percent, 32.3 percent, 30.9 percent and 30.4 percent, respectively, in the first through fourth quarters of 2020, according to a report from Statistics Korea.

The figure has surpassed 30 percent only five times since 2003, when the statistical agency began compiling related data. Before 2020 it hit 30.3 percent in the fourth quarter of 2016.

Accordingly, the household income posted record highs on-year in each quarter last year, officials said.

The household income surplus rate is the percentage of money that households have left over from their total disposable income -- what is left of their salaries after they pay taxes -- after spending on goods and services, including food and shelter.

Experts say household income far outpaced expenditures last year as virus-battered families reduced private spending despite the government’s COVID-19 support programs, including emergency cash handouts, due to the prolonged COVID-19 crisis. This is known as a “recession-type surplus.”

“In the wake of the economic crisis, a decrease in household consumption normally occurs at a faster pace than income reduction does,” said Yoo Kyung-won, a professor of economics and finance at Sangmyung University.

The average monthly household income stood at 5.35 million won ($4,733), gaining 3.7 percent on-year in the first quarter last year, but consumption declined 4.9 percent from a year earlier to 3.94 million won in the same period, industry data showed.

Monthly household income jumped 4.8 percent, 1.6 percent and 1.8 percent on average from the previous year during the second, third and fourth quarters, respectively. Household expense rose 1.4 percent in the second quarter and dropped 2.2 percent and 0.1 percent in the third and fourth quarters.

By Choi Jae-hee (cjh@heraldcorp.com)