South Korean household surplus grows, but real wages fall sharply

South Korea's household surplus grew by 9.6% in the second quarter compared to the previous year, as income rose faster than expenditures. However, this growth was largely driven by government support, with real labor income experiencing its most significant decline in six years.

Real household income, excluding inflation, increased by 1.5% year-on-year. This marks a rebound from the first quarter's 0.4% growth. Despite this, nominal average monthly labor income saw only a modest 0.8% increase, reaching 3.218 million won. Crucially, real labor income, adjusted for inflation, decreased by 2.1%, continuing a downward trend for the second consecutive quarter.

The sharpest decline in real labor income in nine quarters, and the largest for a second quarter since 2020, was attributed to a slowdown in wage growth and a shift from employment growth to a decline in the number of wage workers. Meanwhile, nominal average monthly income rose by 4.5% to 5.295 million won, primarily due to a 20.4% surge in transfer income, which includes government subsidies and aid. This transfer income accounted for approximately 70% of the total income increase.

Consumption showed a weak recovery, with real spending increasing by only 0.4%. Government support payments, such as those for high oil prices, disproportionately benefited lower-income households, leading to an improvement in income distribution. The income gap between the richest and poorest households narrowed to its lowest point since 2006.

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The number of wage workers slowed in the first quarter and turned to a decrease in the second quarter, and wage growth also slowed.