The high levels have been attributed to income stagnation and rising food costs

By Ryu Yi-geun　

　

The Engel coefficient for low-income earners recorded its highest level in seven years as a result of income stagnation and rising prices.

According to a Statistics Korea report Sunday on household income and expenditures by income vigintiles, the fifth vigintile, representing the lowest earning 20% of the population, had an Engel coefficient of 22.8% for the third quarter from July to September of this year. This is the highest level recorded since 24.4% in the third quarter of 2004.

The main reason for the coefficient’s rise is less an increase in overall expenditures than a greater rate of increase in food costs. Consumption expenditures for 3Q11 were up 5.8% from the same period in 2010, compared to 7.0% for food and non-alcoholic beverages.

The same period saw a steeper rate of increase in prices for food and non-alcoholic beverages compared to overall consumer prices, at 4.6% to 4.2%, respectively.

The Engel coefficient for households as a whole was also at its highest level in three years, at 15.0%. However, the coefficient for the first vigintile, representing the top 20% of earners, stood at 12.2% for the third quarter, or just half the rate for the fifth vigintile. This rate was down 0.2 percentage points from the same period in 2010.

EduMoney team leader Kim Mi-seon said, “It would be wrong to attribute the rise in the Engel coefficient solely to rising prices.”

“We also have to consider larger background factors with the fact that low income groups are unable to increase their expenditures as their income levels drop or stay in place,” Kim explained. The Engel coefficient may increase due to rising food prices, but it also goes up when overall consumption expenditures drop.“

　　

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