The disposable income of South Korean middle-class households has dropped to the lowest since 2019, goverment data showed Monday.
An average middle-class household in South Korea had about 658,000 won in dispensable income in the fourth quarter of 2024, government data showed, using figures adjusted for inflation, in 2020 won terms.
It is the first time the amount has dropped below the 700,000 won-mark since the end of 2019.
The amount in 2024 terms was 754,000 won ($540).
The Korean Statistical Information Service ran by Statistics Korea found that the household surplus — defined as the amount of money left after covering the essential costs such as tax and other spending across Korea — had dropped 11.8 percent compared to the same period a year earlier.
There are numerous definitions of the middle-class, even among those that focus on income. For example the criteria used by the Organization for Economic Cooperation and Development being households with incomes between 75 percent and 200 percent of the country's median household income. This particular report defined the middle-class as households in the middle quintile — between the top 40 percent and top 60 percent by income.
Since the fourth quarter of 2019, household discretionary income has fluctuated, but never fallen below 700,000 won, with the figure peaking at 941,000 won in the third quarter of 2021.
Looking at the final quarter of last year, the report showed that the expenditure of the middle-class rose particularly in the areas not directly related to their everyday lives.
The biggest contributor was one-off charges such as real estate-related taxes, with an average increase of nearly fivefold to 55,000 won. And housholds spent on average 108,000 won on paying interests for loans — 1.2 percent more than the same quarter in 2023 — with the
Education spending also increased by 13.2 percent to 145,000 won during the same period.
The rise in education spending was significantly higher among the middle-class than the 0.4 percent increase for overall households.
The recent decline in middle-class discretionary income is in contrast with the surplus recorded for the overall population, which increased for the second straight quarter in the 2024 Q4 to 1.3 million won.
Recent reports have touched off concerns about the financial struggles of the middle-class, but recent data from Statistics Korea indicates that the percentage of those that can be defined as middle-class in the OECD standards have actually increased than before.
According to Statistics Korea's 2024 numbers, 62.3 percent of the households in the Q4 of 2023 had an income of between 75 and 200 percent of the nationwide median income, up from 61.4 percent in 2019.
But a 2022 report by the NH Investment and Securities showed that of those defined as middle-class by the OECD, 45.6 percent thought they were in the lower-class. This implies that many of the South Koreans misperceive their financial situation to be worse than they actually are.
minsikyoon@heraldcorp.com
