Korean Economic Woes: Inflation and Unemployment Hit Hard
According to data released on Wednesday, Koreans are experiencing an increased level of economic distress due to the combination of high inflation and unemployment, which has severely affected their daily lives. The economic misery index, which measures the financial well-being of citizens by adding the seasonally adjusted inflation rate to the unemployment rate, reached 8.8 percent in January. This was the highest level for January since 1999 when a new method of data collection was introduced by Statistics Korea.
The index was originally developed by Arthur Okun, a U.S. economist, in the 1960s to evaluate the impact of high costs of living and unemployment rates on people’s economic well-being. The inflation rate hit a three-month high of 5.2 percent in January, following a 5 percent increase in November and December. Meanwhile, the unemployment rate stood at 3.6 percent, and the number of unemployed people rose above 1 million for the first time since January 2022.
According to Lee Sang-ho, head of the economic policy team at KERI, the economic misery index is taken more seriously in 2023 due to the rising inflation that could harm the job market in the upcoming months. Despite the expected increase of jobless individuals during January, the inflation figure exceeded the government’s target range of 3 percent. Joo Won, deputy director of the Hyundai Research Institute, mentioned that the economic misery index could potentially worsen as job growth has been steadily decreasing for eight consecutive months, and the cost of living is projected to rise further.
The inflation is also reflected in the raised electricity prices and the increase in gas prices in April, while the public transportation fares in Seoul and other major cities will be postponed due to the need to control inflation. The highest record of economic misery index was recorded in July 2022 at 9.2 percent. The remaining months of February and March of 2001, May 2001, July 2008, June 2022, and April 2001 also showed a high index, ranging from 8.9 percent to 9.1 percent.
