🚨 The Inflation Paradox: Official Numbers Say Stable, Living Costs Skyrocket
Today Korean Economic News | 2025.05.25
📌 Government Says "Prices Stable" vs People Say "Living Costs Exploding"... The Gap Between Data and Reality
💬 The government announced that Korea's consumer price index rose only 2.1% in April 2025, calling it "stable inflation." But the reality on the ground tells a different story. Food and drinks went up 3.0%, while restaurant and hotel costs jumped 3.2% - much higher than the official average. Over the past 10 years, food prices have skyrocketed 41.9%, nearly double the overall inflation rate of 21.2%. A bowl of jajangmyeon (black bean noodles) went from 5,154 won in 2019 to 7,069 won in 2023 - a 37% jump. Kimbap rose from 2,408 won to 3,323 won, also up 37%. With real wages falling at the same time, ordinary families are feeling the squeeze more than ever, leading to fears of a "living cost crisis."
1️⃣ Easy Explanation
The government says "prices are stable," but why do we feel like life is getting more expensive every day? It's because there's a huge difference between official price statistics and the real cost of living.
The Consumer Price Index (CPI) is the government's tool for measuring inflation. It calculates the average price change of 458 different items. But many of these items are things we don't buy very often - like cars, home appliances, or clothes that we only purchase every few years.
But the prices we feel every day are different. We notice when the cost of our daily meals goes up, when delivery food gets more expensive, when our favorite coffee shop raises prices, or when subway and bus fares increase. These everyday expenses are what really affect our wallets.
The numbers show this gap clearly. While the government says overall prices went up 2.1%, food prices rose 3.0% and restaurant costs jumped 3.2%. The things we buy most often are getting much more expensive.
The problem gets worse when we look at the past 10 years. Food prices have gone up an incredible 41.9% over this period - twice as fast as overall inflation (21.2%). This means the cost of food we need to eat every day has been rising twice as fast as everything else.
Looking at specific menu items makes this real. Jajangmyeon went from 5,154 won in 2019 to 7,069 won in 2023 - up 37%. Kimbap jumped from 2,408 won to 3,323 won, also up 37%. Even pork belly prices rose nearly 20%.
To make things worse, wages aren't keeping up with rising prices. While our paychecks might be a little bigger, the actual buying power (called "real wages") has actually gone down. We get slightly more money, but everything costs so much more that we're actually worse off than before.
This is why the government can say "prices are stable" while ordinary people feel squeezed by rising living costs. On average, inflation looks OK, but the specific things we spend money on every day have gotten much more expensive.
2️⃣ Economic Terms
📕 Consumer Price Index (CPI)
The Consumer Price Index measures how much more expensive things get for city families who buy goods and services for daily life.
- It uses 2020 as the base year (=100) and tracks 458 different items.
- Each item gets weighted based on how much families typically spend on it.
- This is the official way governments measure inflation and make policy decisions.
📕 Felt Inflation
Felt inflation is what regular people actually experience when they go shopping and pay bills.
- It varies from person to person based on what they buy and how often.
- It can be very different from official statistics, especially when daily necessities get more expensive.
- It depends on your income level, age, and where you live.
📕 Living Price Index
The Living Price Index tracks 144 items that people buy frequently and feel price changes most.
- It focuses on things people buy often and spend a lot on, where price changes really hurt.
- It shows the real burden people feel better than the overall consumer price index.
- Governments use this to understand what ordinary families actually experience.
📕 Real Wages
Real wages show your actual buying power after accounting for price increases.
- Even if your paycheck goes up, your real wage falls if prices rise faster.
- This is the key measure of whether workers are actually better or worse off.
- When real wages fall, people spend less and the economy can slow down.
3️⃣ Analysis and Economic Outlook
✅ Why Official and Felt Inflation Are So Different
Why is there such a big gap between what the government reports and what people actually feel? Let's look at the structural reasons.
First, they measure different things. The consumer price index tracks 458 items, but the living price index only looks at 144 items people buy frequently. The official index includes cars, appliances, and furniture - things that stay cheap or even get cheaper due to technology improvements. But the things we buy every day - food, restaurants, transportation - keep getting more expensive. Poor families feel this more because they spend a bigger share of their money on necessities. Data shows the poorest 20% of families experienced 23.2% inflation, while the richest 20% only felt 20.6% - a 2.6 percentage point difference.
Second, different families have different spending patterns. The official index reflects average spending across all families, but individual families spend differently. Young workers spend more on restaurants and transportation. Families with children spend more on education and food. Elderly people spend more on healthcare and basic necessities. Poor families spend more on food, which has been rising twice as fast as everything else. Also, housing costs like rent increases don't show up directly in the price index, but they're a huge burden for families.
Third, psychological factors make inflation feel worse than it is. People notice price increases much more than price decreases. We also pay more attention to things we buy frequently. If coffee goes up 100 won, we notice immediately. If TV prices drop 100,000 won, we might not even know. Media coverage also matters. News about "rising prices" appears much more often than stories about "stable prices," making people more sensitive to inflation. All these psychological factors combine to make inflation feel worse than the actual numbers show.
The gap between official and felt inflation is natural, but when it gets too big, policymakers need to pay attention. Understanding what ordinary families actually experience is crucial for good policy.
✅ Why Daily Necessities Are Getting So Expensive
Let's analyze why the prices of things we use every day are rising so fast.
First, food price increases have multiple structural causes. Climate change is making weather more unpredictable, disrupting food supplies. Floods, droughts, and cold snaps damage crops, and these losses immediately show up in market prices. Rising global commodity prices also play a big role. When wheat, corn, and soybean prices go up internationally, processed foods and meat prices follow. Add rising shipping costs, packaging material costs, and labor costs, and you get widespread cost increases across the board. After COVID, restaurant industry sales grew but transaction volume fell 2.2% - meaning higher prices drove the growth.
Second, changes in distribution and monopoly problems are pushing prices higher. Large retailers and online shopping platforms now control distribution, increasing middleman margins. Food delivery apps especially add delivery fees and commission costs that get passed on to consumers. Online food purchases jumped from 4.9% in 2019 to 25.2% in 2023, bringing convenience but also extra delivery costs. In some product categories, a few large companies dominate the market, limiting price competition. This is especially noticeable in instant noodles, snacks, and soft drinks.
Third, rising necessity prices affect society broadly. Poor families face heavier burdens, increasing income inequality. Lower-income people spend more of their money on food, so they get hit harder by food price increases. This reduces overall spending and hurts the domestic economy. Small business owners face a dilemma - their costs are rising, but they can't easily raise prices because customers are already struggling. Long-term, consumption patterns are changing. People eat out less and cook more at home, or they "downgrade" by choosing cheaper brands instead of premium ones.
Rising necessity prices have moved beyond simple market forces to become a social problem. Governments need comprehensive solutions including supply stabilization policies, distribution system improvements, and stronger monopoly regulations.
✅ Falling Real Wages and the Vicious Cycle of Family Financial Stress
Why are wages going up but life getting harder? Let's examine the causes and effects of falling real wages.
First, wage increases aren't keeping up with price increases. In 2023, nominal wages rose 2.8% but real wages fell 0.9%, meaning actual buying power decreased. Companies are limiting wage increases because they're worried about rising costs. Small businesses especially can't afford big wage increases because raw materials and labor costs are squeezing their profits. Even large companies are being conservative with wage policies due to increased global competition and uncertainty. Changes in employment types also matter. More workers are in non-regular jobs and platform work, which typically have lower wage growth than regular full-time jobs, pulling down overall wage growth.
Second, rising essential expenses are squeezing family budgets. Even when wages go up a little, housing, food, education, and healthcare costs rise even more, leaving families with less money to spend. Housing costs are especially serious. Rising jeonse (key money) deposits are forcing families to switch to monthly rent, and both monthly rent and maintenance fees keep climbing. Education costs are also a heavy burden. Private tutoring fees and university tuition keep rising, putting extra pressure on families with children. Healthcare costs are also rising steadily alongside an aging population. These essential expenses are hard to cut, forcing families to give up other spending.
Third, falling real wages create a vicious cycle for the whole economy. When families have less buying power, they spend less, which reduces company sales. Companies respond to poor sales by cutting investment and reducing employment, which further weakens wage growth pressure. The forecast that private consumption will grow only 1.1% in 2025 reflects this trend. Consumption patterns are also becoming more polarized. High-income families continue spending actively, but middle and low-income families only buy necessities - creating "K-shaped consumption." This widens gaps between social classes.
Falling real wages isn't just a problem for individual families - it weakens growth momentum for the entire economy. We need policy efforts to restore balance between wages and prices, along with building sustainable wage growth foundations through productivity improvements.
4️⃣ Conclusion
The government emphasizes "price stability" with a 2.1% consumer price index increase, but people's actual living cost burden keeps growing. This shows a structural gap between official statistics and reality.
The core problem is that daily necessities are rising much faster than overall inflation. Food prices have jumped 41.9% over 10 years - twice the overall inflation rate. Restaurant costs have risen even more steeply. Jajangmyeon and kimbap both rising 37% represents a shocking change that directly hits ordinary people's daily lives.
What makes it worse is that wage increases can't keep up with price increases, causing real wages to fall. People get slightly more money but living costs rise even more, making life actually harder than before. Poor families especially feel heavier burdens because they spend more of their income on necessities.
If this continues, it could lead to reduced consumption and economic slowdown, widening gaps between social classes, and increasing anxiety among ordinary families. The government shouldn't rely only on average statistics but should accurately understand real family burdens and create policies that reflect this reality.
Short-term solutions need to focus on stabilizing necessity prices and supporting ordinary families. Long-term, we need comprehensive measures including distribution system improvements, stronger monopoly regulations, and building foundations for sustainable wage growth through productivity improvements.
Solving this "inflation paradox" - where statistics show stability but reality shows instability - is one of the most urgent tasks facing the current government. We desperately need a policy shift that focuses on people's lives, not just numbers.