December 21, 2018 13:30
More than a quarter of Korean household incomes is spent on repaying debts, which puts a major clamp on private consumption.
According to a study by Statistics Korea, the Bank of Korea and the Financial Supervisory Service released Thursday, the average assets owned by a Korean household stand at W415.7 million, while their average debt stands at W75.3 million (US$1=W1,126).
Assets increased 7.5 percent this year and debt rose 6.1 percent, but disposable income grew only 3.3 percent from W45.2 million last year to W46.7 million. The main reason for the slowdown in income growth was that taxes increased 11.7 percent on average, the fastest growth since the government began tallying such data.
The study was conducted on 20,000 households across the nation.
The figures are based on data from last year and do not reflect the impact of the government's minimum-wage hike this year, which has been shown to have exacerbated income disparity and unemployment due to the loss of many low-paying jobs as employers cut back on labor costs.
Park Sang-young at Statistics Korea said, "To put it simply, people took out loans to buy homes and their assets grew when their homes appreciated in value, but their debt repayments are forcing them to cut back on spending."
The proportion of debt principal repayments to disposable income rose from 24.8 percent last year to 26.1 percent, while the proportion of debt to disposable income rose from 122.1 percent to 128.1 percent. Some 67.3 percent of households that took out loans said principal repayment is a struggle, while 5.7 percent said they cannot repay their debts.
Another worrisome factor is the surge in debt among people in their 30s and 40s, a segment that normally enjoys a little breathing space after paying off their debts. Debt increased 14.6 percent among people in their 40s and 13.8 percent among people in their 30s. Only among 50 something did debt fall 0.8 percent, and among 20-something it rose only 0.2 percent.
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