Household Debt Still Soars 2.7 Times Faster Than Income

  • By Shin Su-ji

    December 18, 2019 12:37

    The average debt shouldered by every household in Korea now stands at W80 million, rising 2.7 times faster than the growth in disposable income (US$1=W1,167).

    Average household debt stood at W79.1 million as of March, up 3.2 percent from a year earlier, according to Statistics Korea on Tuesday.

    The lowest income bracket's debts decreased slightly by 0.2 to 2.9 percent, but high-income earners' borrowings increased 3.3 to 8 percent.

    People in their 40s saw the biggest rise among all age groups at 5.7 percent to W106.9 million.

    But income growth was far slower. The average household income stood at W58.3 million last year, up 2.1 percent compared to 2017 and the lowest rate of growth on record. The increase was partially buttressed by government support.

    Earned income grew 3.9 percent but business income decreased 5.3 percent.

    Spending surged disproportionally, perhaps contributing to debt increase. Taxes, state insurance and loan interest payments increased 6.2 percent to W10.98 million, three times more than income growth.

    Disposable household income therefore inched up only 1.2 percent to W47.3 million, which was also a record low.

    That means nominal income grew by W1.23 million last year on-year but disposable income by only W580,000. But given that consumer prices rose 1.5 percent, households were actually left with less money to spend.

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