It appears that income gains among high earners are not leading to more consumption but are being used for asset accumulation or savings. Analysts say a shift in these income flows lies behind the lack of a strong pickup in perceived consumption even during an economic recovery phase.
According to the report "The impact of growth differentiation by institutional sector on prices," published by the Bank of Korea (BOK) on the 27th, the average income of households in the top 20% by income in 2024 increased by about 7.36 million won from a year earlier. Compared with other quintiles, the increase was up to 15 times (470,000 won for the first quintile) and at least three times (2.42 million won for the fourth quintile).
However, their propensity to consume was relatively low. An estimate of the marginal propensity to consume (MPC)—how much consumption increases when income rises by 1 won—showed that, as of 2023, the consumption propensity of high earners (fourth to fifth quintiles) was just 0.07. This means that when income rises by 100 won, consumption increases by only 7 won. By contrast, the consumption propensity of the middle-income group (third quintile) was 0.17, and that of the low-income group (first to second quintiles) was higher at 0.19.
The Bank of Korea (BOK) assessed that this trend is constraining broader consumption growth across the economy. Generally, when income increases, consumption rises, leading to stronger aggregate demand and higher prices. But if income gains are concentrated among high earners and they do not significantly increase spending, the consumption-boosting effect on the overall economy is inevitably limited.
The price pickup via stronger consumption also appears weaker than in the past. When the Bank of Korea (BOK) analyzed the correlation between core inflation and the gross domestic product (GDP) gap, the positive correlation between the economy and prices was clear in 2021–2022 but weakened considerably in 2023–2025.
The GDP gap is actual GDP minus potential GDP, and a larger figure indicates the economy is running hotter than normal. Typically, when the economy overheats, price gains accelerate, but if income growth is concentrated among high earners, overall consumption may not increase much, weakening the relationship between the GDP gap and prices.
The Bank of Korea (BOK) said, "While demand-side factors may expand somewhat with this year's economic recovery, growth differentiation among institutional sectors is likely to act as a factor that eases inflationary pressure from the recovery."