KOREA FOCUS
Growth of Single Households and Changes in Consumption
Ko Ga-young

Researcher
LG Economic Research Institute


I. Introduction

 

The portion of single households in Korea reached 23.9 percent in 2010, more than double the 9.0 percent in the 1990s and the most rapid increase in the 34-nation Organization for Economic Cooperation and Development (See <Figure 1>). The nation’s single household population still trails far behind those of North European nations, where it is far easier to live alone thanks to advanced social welfare system, as seen in Sweden and Norway (See <Figure 2>). Yet, the rise in single households will likely remain unabated in Korea along with the rest of the world.


The demographic trend will affect all aspects of life including politics, economy, society and culture. In the economy, changes in consumption deserve particular attention. The consumption scale and pattern of those who live alone tend to differ from households of two persons or more.


II. Growing Tendency toward Single Households

 

1. Middle-aged Men and Elderly Women Increasingly Live Alone 

 

Single-person household populations are mostly seen at both ends of the age spectrum. Young adults are attending college or working and still single. Later, after marrying and raising a family, they may be alone again if they are divorced or widowed and their children have all left home. Thus, the share of single households is high among individuals under 40 and over 70. In 2010, 1.6 million Koreans under 40 lived alone, the highest among all age groups, followed by 790,000 single households with those over 70. (See <Table 1>).


On the other hand, the fastest growth in the number of single households is witnessed among men in their 50s. Single households in this population segment nearly tripled from 100,000 in 2000 to 290,000 in 2010. The growth of single households of middle-aged men is due to the increased ratio of unmarried and divorced men. Among men in their 50s, the share of unmarried men increased from 1.1 percent in 2000 to 3.4 percent in 2010. The increase of women’s participation in economic activities and the increase in divorces caused by changes in the perception of marriage also inflated the number of single households with middle-aged men.

 

Among 50-something men, the share of divorcees rose from 3.3 percent to 7.6 percent over the cited period. As more women tend to live with children after divorce, the increase of divorce leads mainly to the growth of single households of middle-aged men.


Meanwhile, as fewer and fewer people tend to live with their parents after marriage, households with widows and widowers living alone have increased sharply. Particularly, the number of single households of aged women is increasing rapidly, which is attributable to their longer average lifespan. The number of single households of women over 70 stood at 650,000 in 2010, growing rapidly from 310,000 in 2000.

2. Single Households Spend More than Two-person Households
 
A rise in single households tends to increase overall consumption. Purchases that can be shared such as durable goods and homes are bought individually. Also, items that typically would be purchased in bulk by two or more persons are bought repeatedly by individuals living alone.


Per-capita consumption of single-person and two-person households stood at 970,000 won and 770,000 won on average a month, respectively, in 2012, indicating single households spent 1.3 times more. However, simply comparing nominal figures does not give the complete picture. Differences in sex and age composition as well as income levels can have an impact. For example, the share of low-income, old-age households is higher among single households, making their consumption expenditure relatively lower. Also, it can be problematic to compare the consumption of households with young children with that of single households.


This study compared the consumption scale and composition of single households, item by item, with those of two-person households of the same age group that have no children. It calculated per-capita consumption by adjusting differences in sex, age and income between the two types of households.


In 2012, single households’ disposable income and consumption stood at 1.46 million won and 1.14 million won, respectively, and their average propensity to consume was 77.8 percent. On the other hand, the per-capita disposable income and consumption (before adjustment) of two-person households stood at 1.39 million won and 1 million won, respectively, and their propensity to consume was 71.8 percent (See <Figure 3>). Assuming the income of two-person households is the same as that of single households, their per-capita consumption amounts to 1.05 million won. In other words, overall consumption will increase by 8 percent when a two-person household becomes a single household.

The age band that showed the biggest consumption gap between one-person and two-person households was the under-40 group (See<Table 2>). The monthly consumption of under-40 single households averaged at 1.4 million won, 25 percent higher than the 1.12 million won in per-capita consumption of the under-40 two-person households. Among the over-50 households, too, single households’ consumption was 8 to 18 percent higher. However, consumption by single households in their 40s was 10 percent lower than that of two-person households in the same age group. Forty-somethings living alone have passed the average marriage age and are likely to remain single. Unlike 30-somethings living alone, who enjoy consumption to the full before marriage, those in their 40s, who are likelier to continue to live alone, tend to be thrifty in order to prepare for old age.

 

III. Consumption Pattern of Single Households
 
Single households differ from two-person households not only in their consumption scale but also in what they purchase. The items on which single households spend most sharply compared with those purchased by two-person households as follows (See <Figure 4>).

1. Housing Cost Shows the Biggest Difference
 
Single households spend 62 percent more per capita than two-person households on housing, the biggest difference among all items surveyed. But while singles are usually paying monthly rent, two-person households who own their home or have a mortgage incur indirect housing costs, too.

 

The asset value of houses was also higher in single households in per-capita terms. According to a 2012 household financial survey, the average asset value of single households’ homes was 140 million won, 48 percent higher than the 94 million won in per-capita asset value of two-person households’ homes (See <Figure 5>).

 

The reason the single households’ housing cost is higher is because their per-capita living space is larger. Rooms in a two-person household are shared, diminishing the space apportioned individually. According to a 2010 population and housing census, the average residential space of single households was 70 square meters, 75 percent larger than the 40 square meters in per-capita residential space of two-person households.

2. Heavier Consumption on Liquor and Tobacco
 
Next to the housing expense, the second biggest difference appears in liquor and tobacco consumption. Single households’ consumption of alcohol and cigarettes was 50 percent higher than per-capita consumption of two-person households. There were differences of 30 percent and 64 percent in liquor and tobacco consumption, respectively (See <Figure 6>).


Particularly, liquor and tobacco consumption of male single households was larger than the total consumption of couple households. Considering men tend to drink and smoke more than women, men who live alone consume more liquor and tobacco than married men.


There can be several reasons for the heavy consumption of liquor and tobacco by men who live by themselves. Loneliness is the main culprit. According to a U.S. research, loneliness leads to activities that cause premature death, such as alcoholism or smoking 15 cigarettes or more per day. On the other hand, after getting married, men’s drinking and smoking tend to be influenced by their wife.

3. Greater Preference for Dining Out and Processed Food
 
People who live alone like to dine out or buy takeaway food rather than cooking at home. It seems this is because cooking one meal is inefficient in terms of time and cost. Not only is it easy to buy food for one serving, but it can be more economical to dine out or buy takeaway food, including lunch boxes and side dishes. The average dining-out expense of single households was 170,000 won, 27 percent higher per-capita than two-person households. Also, the former’s consumption of processed food, such as instant frozen food and precooked side dishes, was 51 percent more than the latter’s (See <Table 3>). By age, the increase of dining-out cost was highest among single households of the under-40 group. This seems attributable to younger generations having active social gatherings and relationships.

Particularly, male single households’ dining-out spending exceeded that of female single households. Male single households’ average dining-out cost was 220,000 won, while that of female single households was 120,000 won. On the other hand, grocery consumption was higher among female single households than male single households.
 
4. Single Women’s Spending on Personal Care Goods and Services

 

The purchase of clothes and consumption of hairdressing goods and services (cosmetics and beauty parlor costs) were also higher among single households, which is due to heavy spending by female single households. Clothing purchases by single households was 12 percent higher than the per-capita amount of two-person households, and hairdressing spending of the former was also 10 percent higher than the latter’s. Clothing purchases were particularly high among young women. The monthly clothing expense of under-40 female single households was 157,000 won, almost approaching the 190,000 won in total clothing expense of couple households (95,000 won for each) in the same age group (See <Table 4>). On the other hand, the clothing spending of male single households was half the amount of female single households.


Beauty-related spending is also higher among female single households. Female single households’ monthly hairdressing expenditures were 57,000 won, while comparable per-capita consumption of two-person households was 36,000 won, indicating women tend to reduce spending on hairdressing after marrying. Single women spend more on clothes and hair care as they tend to be employed and are out socializing or dating.

5. More Socializing to Avoid Isolation
 
As single households increase, social connection-oriented consumption is also growing. For people who live alone, social networking services are an easy means to maintain relationships. Single households’ communication expense was 10 percent higher than that of per-capita spending of two-person households (See <Figure 7>).


Meanwhile, singles do not communicate with others only through on-line networks. Socializing expenditures, which comprise expenses needed to maintain ties with friends and relatives, was 11 percent higher among single households than among two-person households. Also, the high dining-out costs of single households can be interpreted as a result of their active social life. 

 

6. Men Prefer Physical Exercises, Women Like Cultural Services and Pets
 
In overall expenditures on entertainment and culture, there is not a big difference between single households’ consumption and that of two-person households. First, single households tend to do exercise and enjoy cultural life, including music and fine arts, more than two-person households do. Single households’ expenditure on exercise was 16 percent higher than per-capita consumption of two-person households, and the former’s consumption of cultural services was 33 percent higher than the latter’s.


However, there was a gender difference in spending on physical exercise and cultural services. Spending on physical exercise was higher in male single households, and the opposite was true in expenditure on cultural services (See <Figure 8>). By age, younger generations have significant effects on increasing the consumption of both exercises and cultural services as a result of living alone, while the aged group does not. That is, Korea’s senior citizens who live by themselves seldom appear to enjoy leisure activities, such as physical exercise and cultural events. Among the over-70 single households, 51.5 percent do not enjoy any leisure activities.

 

Raising pets can help ease loneliness. Pet-related spending was 69 percent higher among single households than two-person households. Particularly, female single households’ pet-related spending is higher than that of two-person households.

7. Men Seldom Travel Alone
 
The general assumption is that people who live alone can freely enjoy leisure activities and travel a lot, but single households’ travel budget is not very high. Single households’ travel expenditure is 24 percent lower than per-capita consumption of two-person households (See <Table 5>).


Particularly, male single households’ travel spending was very low compared with female single households. The monthly spending on travel by male single households was only 15,000 won, less than half of the 34,000 won by female single households. On the other hand, the monthly travel expense of under-40 female single households was particularly high with 72,000 won. This is because single women are less bound by work and family ties than married women or single men. Young women are more inclined to travel by themselves through package tours or with friends.


On the other hand, single households of the elderly, both male and female, spend very little on travel. This comes in stark contrast with Japan, which experienced the increase of single households earlier than Korea. In Japan, travel consumption increased along with the increase in single households, as demand for solo traveling increased in the senior population. In Korea, on the other hand, couples still travel together in general.

8. Higher Demand for PC, White Appliances and TV
 
Since durable home goods are shared by family members, per-capita expense declines as the number of household members increases. The gap widens depending on the kinds of goods. Compared with two-person households, single households’ consumption was 38 percent higher for personal computers, 16 percent higher for white goods such as washing machines and refrigerators, and 6 percent higher for TVs (See <Figure 9>).


As the functions of personal computers diversify and their sizes get smaller with the development of laptop computers, single households are more likely to own them now than before. The consumption of white goods is also higher, although it lags behind that of PCs. Manufacturers are now selling smaller appliances geared for single consumers at downward prices, stimulating buying plans.


On the other hand, people have become increasingly able to watch broadcasts on PCs and other mobile devices, so the demand for TVs by single households will likely be limited.

9. Young Single Households Prefer Pharmacies to Hospitals
 
In medical care and health services, single households’ expenditure is 8 percent lower than the per-capita expenditure of two-person households. Although expenditures on simple medical care such as prescription drugs are higher among single households, they incur lower costs for outpatient treatment and hospital stays. However, the hospital costs of singles in their 50s or older is noticeably higher than those in their 30s and 40s. (See <Table 6>).


Singles tend to take medicine rather than visiting hospital when they are sick. This tendency seems to be attributable to their relative negligence of health care before marriage, just as the young single households’ consumption of liquor and tobacco is high. Meanwhile, the high expenditure on hospital services among elderly single households seems to reflect the reality that they can’t help but depend on hospitals as they have no caregivers at home. The consumption of hospital services among over-70 single households was 20 percent higher than that of two-person households in the same age group.

10. Demand for Private Cars Sharply Falls
 
As seen earlier, single households’ consumption is bigger than per-capita consumption of two-person households in home appliances. However, in other categories of durable goods, such as automobiles and furniture, single households’ consumption is lower by 31 percent and 19 percent, respectively, than that of two-person households.


Single people are more inclined to use public transportation until they marry. Only 32.6 percent of single households own a car, compared to 69.5 percent among two-person households. Single households’ monthly spending on public transportation, including fees for subways and buses, amounted to 33,000 won, nearly double the 17,000 won of per-capita spending in two-person households (See <Figure 10>).


Also, living alone reduces the need for furniture that is bulky and not used much. Apartments for singles in Korea often do not have formal living rooms, reducing the need for sofas. Also, since most singles live at rented homes, they tend to move frequently and naturally have less interest in buying furniture.

 

IV. Consumption in 2020 and Changes in Population and Household Composition
 
According to the estimation of households in the future by Statistics Korea, the portion of single households is forecast to reach 29.6 percent in 2020 and 32.7 percent in 2030.


The growth of single households is expected to offset the contraction in consumption resulting from population aging. Given changes in consumption due to changes in household composition by 2020, population aging will reduce consumption by 1.6 percent compared with 2012, but the increase of single households or the decrease in household members will have the effect of increasing overall consumption by 3.1 percent (See <Figure 11>). Accordingly, changes in population and household composition will have the effect of pushing up overall consumption by 2.1 percent.

The growing tendency toward single households, along with population aging, is expected to have a powerful effect on the consumption of specific items. According to our estimation of consumption due to demographic changes by 2020, sharp increases in spending will likely be seen in housing maintenance and renovation, grains, fresh food, medicines and medical supplies, flowers, and pet food and supplies. In contrast, consumption of education, childbirth-related services, baby products, high-calorie food, and information-communication equipment will likely saw steep declines (See <Table 7>).


Expenditure on home maintenance and renovation is expected to have the biggest jump as the trends of single households and population aging accelerate. Elderly people tend to own their homes and will make repairs rather than move. Housing-related demand is estimated to increase 21 percent by 2020 compared with 2012.


Consumption of grains, fresh food and medicines will also likely increase sharply, due to single households and population aging. Demand for flowers, pets, land transportation and home appliances will also be affected by the single-household trend.


On the other hand, consumption of education as well as childbirth and baby goods is expected to see a decline of 10 percent or more, as the result of population aging. Likewise, demand will shrink considerably for information-communication equipment, automobiles, and physical exercise and entertainment services.

 


                

As the rapid progress of tendency toward single households will inevitably result in the change of consumption structure, not only businesses but the entire nation will need to prepare for it. Unless Korea improves its systems and infrastructure that can match the speed of movement toward single households, the nation may likely run into social and economic problems.


The supply glut of large apartments can be cited as an example of failure to cope with movement toward single households. As the local builders supplied mainly mid- to large-sized apartments in the early 2000s, the supply-demand imbalance by apartment size has continued until now amid a plethora of unsold apartments. As the increase of single households is expected to continue to push up demand for small apartments in the long run, the government should implement a policy to diversify the supply in housing markets, toward smaller homes and shared houses.


To avoid social isolation, young single households are making the most of PCs and communication equipment, which help them maintain social relationships, but aged single households are not accustomed to using most modern equipment. It will be necessary to expand IT training for old-age groups as well as increase community and cultural centers to help them overcome social isolation and alienation.


Although single households’ overall use of hospital services is low, aged single households are much more likely to need hospital care due to lack of caregivers at home. The demand for hospital services is expected to continue to grow, which makes it necessary for the nation to expand related services and put medical systems in better shape.


While the spread of single households helps buoy overall consumption, its effects will not be long term. The increase of single households will eventually lead to low birthrate and population aging, eroding future potential for consumption. Overall consumption is expected to grow 2.1 percent by 2020 thanks to the increase of single households. However, by 2030, the adverse effect of population aging will have a greater impact, reducing overall consumption by 0.9 percent. The nation will need to devise plans to bolster demand to withstand the long-term slide in consumption. 

[LGERI Report, January 8, 2014, published by
LG Economic Research Institute]