Has the economy really recovered? Four in 10 middle-class people saw their incomes fall

[Financial News] Income conditions for the middle class have deteriorated again, according to a new analysis. Nearly four in 10 people in the middle-income bracket saw their earned and business income decline, marking the highest rate of decline in four years since the COVID-19 pandemic. Expectations for an economic recovery are growing on the back of strong semiconductor exports, but analysts say the gains have not spread to the middle class.
According to the National Data Agency's 2024 Income Mobility Statistics, 38.9% of individuals who were in the third quintile by earned and business income in 2023 saw their income fall in 2024. That was up 3.7 percentage points from the previous year and the highest figure since 2020 (41.2%), when the impact of COVID-19 was reflected.
The share of people whose income declined fell from 38.6% in 2021 to 35.8% in 2022 and 35.2% in 2023, but turned upward again last year. The share whose income fell by at least half also rose 0.5 percentage points from the previous year, to 12.8%.
By contrast, the share of people whose income increased was 57.3%, down 5.7 percentage points from 63.0% the previous year. This was the lowest level since 2021. The share whose income rose by 50% or more was 9.7%, the lowest since the relevant statistics began being compiled in 2018.
The decline in income was most pronounced among middle-income groups. By quintile, the third quintile saw the largest increase in the share of people whose income fell, at 3.7 percentage points. The figure rose by 2.5 percentage points in the second quintile, 3.3 percentage points in the fourth and 1.0 percentage point in the fifth. Only the first quintile saw a decline, of 0.2 percentage points.
It is also noteworthy that the benefits of an economic recovery may vary across income groups. Even if improved performance in key export industries such as semiconductors leads to higher wages and performance bonuses, the benefits may be concentrated among people in their 30s and 40s, who make up a large share of employees at the companies involved, and relatively high-income groups.
An official at the National Data Agency explained, “Performance bonuses and benefits in some manufacturing industries, including semiconductors, tend to be concentrated mainly in the fourth and fifth quintiles,” adding, “There may be limits to how directly the benefits of strong exports reach middle-income groups such as the third quintile.”
Meanwhile, the Bank of Korea also analyzed in its report last July, “Why Is This Improvement in the Terms of Trade Different?”, that wage growth and capital gains resulting from the semiconductor boom are concentrated among high-income, high-asset households, whose marginal propensity to consume and wealth effects are relatively low. This means that even when economic indicators improve, the income recovery felt by households may vary across income groups.

[email protected] Jung Sang-hee Reporter