October inflation rises 2.8%; gains widen for processed foods and dining out
Average wages and bonuses increase, but regular pay lags behind inflation
Paychecks have grown, but the burden of living costs shows little sign of easing. While average worker wages have risen, the growth rate of regular, recurring pay has failed to keep pace with inflation. Although overall household income increased, real earned income declined. Amid recent upticks in processed food prices, dining-out costs, and fuel prices, wage growth has failed to translate into improved household purchasing power.
According to the "October Consumer Price Trends" released by the National Data Agency on the 3rd, consumer prices rose 2.8% from the same month a year earlier. While the pace of increase slowed compared to September (2.9%), prices for processed foods and dining out both rose 2.9%, widening their upward trajectory. The inflation rate for processed foods hit an 11-month high.
Petroleum prices surged 14.9%, with diesel and gasoline jumping 19.7% and 11.6%, respectively. Conversely, agricultural product prices fell 7.5%. While declining vegetable and fruit prices helped curb overall inflation, processed foods, dining out, and fuel costs maintained their upward momentum.
Purchasing power of earned income falls despite higher average wages
Data from the Ministry of Employment and Labor’s monthly labor survey, released on the 29th of last month, showed that the average monthly wage per worker in August stood at 4.093 million won, up 3.9% from the same month last year. Real wages—adjusted for inflation—also rose 0.8%, marking their first increase in four months.
The rise in average wages was largely driven by an increase in bonuses and performance incentives. Special pay for regular employees surged 32.4%, whereas regular pay, which includes base salary and standard allowances, grew by a mere 2.4%. This was 0.7 percentage points lower than the consumer price inflation rate for the same month (3.1%). Shifts in the timing of special payments by certain companies also influenced the average wage hike.
Disparities across business sizes were also evident. Wages at workplaces with 300 or more employees rose 5.3%, compared to a 3.0% increase at firms with fewer than 300 employees. Wage growth for temporary and daily workers was even lower at 1.3%.
The sluggishness of earned income is further corroborated by the Household Income and Expenditure Survey. In the second quarter of this year, average monthly household income reached 5.295 million won, up 4.5% year-on-year, with real income rising 1.5%. However, the growth rate of earned income stalled at just 0.8 in nominal terms. Adjusted for inflation, real earned income dropped 2.1%, marking the second consecutive quarter of negative growth.
The increase in overall household income was bolstered by an expansion in transfer income, including government subsidies. While real transfer income surged 16.9% in the second quarter, the growth rate of real consumer spending remained sluggish at 0.4%.
Although household disposable income and net surpluses both increased, the purchasing power of earned income declined. Recently released October inflation data showed accelerated gains in processed food and dining-out costs. While average wages are on the rise, regular pay growth continues to lag behind inflation, resulting in two consecutive quarters of decline for households' real earned income.
