South Korea's income gap narrows to record low in Q2 amid government support

South Korea's income disparity has narrowed to its lowest level since records began, driven by government support measures and a slowdown in wage growth among high earners. In the second quarter of 2026, the ratio of disposable income between the top 20% and bottom 20% of households fell to 4.97, a significant decrease from 5.45 a year earlier.

The primary driver behind this improvement was the substantial increase in transfer income, particularly government relief funds distributed to offset high oil prices. These funds, ranging from 100,000 to 600,000 won per person, were provided to the bottom 70% of income earners. This influx of support led to a 9.8% increase in the average monthly income for the lowest 20% of households, pushing their overall income up by 7.5% compared to the previous year.

Simultaneously, the income growth for the highest-earning 20% of households, while still positive, moderated. Their average monthly income rose by 3.8% to 11.15 million won. However, their labor income, the largest component of their earnings, actually decreased by 1.7%. This slowdown is attributed to slower wage growth in large corporations and a slight decrease in the number of wage earners, according to the National Statistical Office.

Overall, average monthly income for all households increased by 4.5% nominally (1.5% in real terms after accounting for inflation) to 5.295 million won. Average household spending also rose, but at a slower pace than income, leading to an increase in disposable income and savings. The average propensity to consume fell slightly, indicating a more cautious spending pattern.

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In the second quarter, despite the overall wage increase for businesses, the wage increase rate for companies with 300 or more employees was relatively low, and the decrease in the number of wage earners appears to be reflected in the top 20% income bracket households.