A Study on the Impact of Adjusting for Non-cohabiting Household Members on Income Inequality Measurements: Focusing on the Survey of Household Finances and Living Conditions

Since 2017, income inequality in South Korea has been measured using the Survey of Household Finances and Living Conditions. This survey combines income information gathered through surveys with highly reliable administrative data which include tax data from the National Tax Service and health insurance payment data from the National Health Insurance Service. Based on the Survey of Household Finances and Living Conditions, income inequality in South Korea has steadily decreased from 2017 to 2019. However, there are some who contend that income distribution has actually become more unequal during this same period. In light of these differing viewpoints, the purpose of this study is to examine whether the measure of income inequality derived from the Survey of Household Finances and Living Conditions accurately portrays the current income inequality situation in South Korea. The technical reports indicate that the survey considers a family of origin to include one-person households who move out for work or study. The issue here is that a relatively high percentage of these one-person households, especially young single adults, tend to have lower incomes and poorer living conditions. Therefore, this study aims to examine how the separation of these young one-person household members who live independently for work or study from their original households impacts the trends in income inequality from 2017 to 2019 as reported in the Survey of Household Finances and Living Conditions. The results reveal that when adjustments are made for one-person households, there are discernible differences in income inequality indices such as the Income quintile share ratio, Gini coefficient, and Palma ratio between the adjusted data and the original data. Further analysis of income inequality trends by age groups suggests that, after adjusting for non-cohabiting household members, the worsening income inequality among young adults in their twenties contributes to the differences observed in income inequality trends from 2017 to 2019 between the original data and the adjusted data.