Koreans feel pain of economic downturn

The economic downturn is hitting an increasing number of ordinary Koreans, with their income falling while borrowing costs and living expenses climb.

As the economic slump forces businesses to cut employment, the ratio of jobless households rose in the third quarter from a year ago, government data showed yesterday.

Jobless households refer to households headed by a person who does not have a job and depends on other family members` income or government support to make a living.

Jobless households accounted for 16.13 percent of households as of the third quarter, a 0.56 percent increase from 15.57 percent a year ago, according to the National Statistical Office.

It is the highest third-quarter ratio of jobless households since the government began compiling such data in 2003.

The ratio of jobless households has been rising since 2003. It was 13.61 percent in 2003, 13.74 percent in 2004, 14.16 percent in 2005 and 14.69 percent in 2006.

In cities, jobless households accounted for 15.29 percent of the total in the third quarter, the highest-ever third-quarter ratio since surveys began in 1988.

Reflecting the sour job market, the nation`s employment rate slipped 0.3 percent year-on-year to 61.8 percent in the third quarter, while the number of economically inactive people climbed to 289,000 during the same period.

"As the employment rate has been stalled at a 60 percent-level, a rising number of people have given up finding jobs, which led to the rise of the jobless household ratio," a researcher at a private think tank said.

The deteriorating economy in the latter half of this year also caused the ratio to increase," he said.

The nation`s real income is also declining.

The inflation-adjusted average monthly wage for a regular worker declined 2.7 percent to 2.4 million won ($1,657.48) in the third quarter from a year ago, the first year-on-year drop in seven years, the Labor Ministry said.

The average household monthly income stood at 3.46 million won in the July to September period, a 5.5 percent rise from a year go. But taking inflation into account, the income has remained flat year-on-year.

With their income staggering, households have seen borrowing costs rise sharply this year. The average lending rate at deposit banks surged to 7.79 percent on average in October, the highest since 7.89 percent in June 2001.

Interest rates have been rising since March. It was 6.9 percent in March, 6.91 percent in April, and rose continuously to reach 7.31 percent in August.

Public utilities fees and service charges for large businesses are also rising.

This month, electricity and gas rates went up 4.5 percent and 7.3 percent, respectively, while rates for households and small and mid-sized businesses were frozen. In April, briquette prices soared nearly 20 percent to 403.25 won per piece.

Major cities have also hiked taxi rates; Busan, Ulsan and Daejeon recently raised taxi rates around 20 percent. Reflecting the increase in diesel prices and labor costs, the fares of express buses and inter-city buses will go up 12.1 percent and 9.7 percent, respectively, by February next year.

Households cut back on spending on unnecessary items due to stagnant income and rising costs.

Engel`s coefficient, which measures the proportion of expenditure on food to total spending, rose for the first time in four years in the third quarter. It stood at 26.7 percent in the third quarter, a 0.59 percent increase from 26.11 percent a year ago. As income falls, Engel`s coefficient rises.

This is the first time that Engel`s coefficient has gone up since 2004.

"As the economic downturn is accelerating and consumer sentiment is yet to thaw, households appear to be spending less on items other than necessary ones such as food," an NSC official said.

Household spending on culture and entertainment dropped 7.3 percent in the third quarter year-on-year, while expenditure on apparel and shoes slid 1.5 percent and telecommunications expenses slipped 1.8 percent.

By contrast, spending on food increased 5.3 percent, while medical expenditure rose 5.5 percent and housing costs went up 5.9 percent.