Minimum Cost of Living
Overview
Minimum Cost of Living (最低生計費, Minimum Cost of Living) is a statistically estimated amount of monetary expenditure necessary for a household to maintain a healthy and culturally minimal standard of living. With the enforcement of the National Basic Living Security Act in 2000, it was used as the core threshold in Korea's poverty policy, but as the limitations of the absolute poverty concept and the stagnation of benefit levels accumulated, it was converted to a system centered on 'standard median income' starting in 2015. Today, it is still treated as an important historical concept and as the starting point for discussions of the minimum wage, living wage, and relative poverty line.
Main Content
Concept and Definition
Minimum Cost of Living is an amount that gives concrete form to the 'right to live a decent life' (Constitution Article 34), and households with income below this are defined as the absolute poor. In other words, it is the lower bound of social security that must guarantee at least this much even if income is zero, and it is distinctive in that it is not merely a survival cost but includes social needs such as medical care, education, housing, and culture. In academia, this is called the 'absolute poverty line,' distinguished from the 'relative poverty line,' which uses the median of the income distribution as its standard.
Calculation Method
The Korea Institute for Health and Social Affairs leads the annual estimation, using two methods in parallel.
- Market Basket Method: A method that determines the minimum consumption quantities of essential items such as food, housing, medical care, and education, multiplies them by market prices, and sums them, directly calculating the absolute minimum line.
- Relative Expenditure Method (expenditure ratios by class): A method that estimates the expenditure of households at the minimum level by referring to the actual consumption expenditure structure of households with similar income levels.
The final Minimum Cost of Living is determined by comparing and adjusting the two results, and is adjusted each year to reflect the inflation rate. For a four-person household, it was about 930,000 won in 2000, about 1.37 million won in 2010, and about 1.63 million won in 2014.
Historical Changes
- In 1999, the National Basic Living Security Act was enacted, and with its enforcement in October 2000, the livelihood protection system was converted into the basic security system.
- From 2000 to 2014, the Minimum Cost of Living was used directly as the selection standard and benefit standard for livelihood, medical, housing, and education benefits.
- With the revision of the law in December 2014, a system based on 'standard median income' was introduced starting in 2015, and the Minimum Cost of Living was excluded from the official threshold.
Relationship with Related Systems
Basic living security benefits are calculated as a certain percentage of standard median income (32% for livelihood benefits, etc.), and the near-poor class, emergency welfare, energy vouchers, and self-sufficiency programs select recipients based on this line. In addition, labor circles' argument that the minimum wage and the Minimum Cost of Living should be directly linked is a key issue in annual minimum wage deliberations, and the living wage introduced by local governments through ordinances is also an expansion of the concept of the Minimum Cost of Living.
Major Debates
Because it is an absolute standard, criticism has been raised that the poverty line remains fixed low despite economic growth, thereby 'concealing inequality.' Conversely, there is also a counterargument that switching to a relative standard would sharply increase the number of benefit recipients and increase the fiscal burden. In addition, issues such as the application of equivalence scales by household size, the method of reflecting housing costs, and the calculation of asset standards (recognized income amount) are intricately intertwined.
Recent Trends
Since 2015, standard median income has been raised by about 4-7% each year, effectively replacing the role of the Minimum Cost of Living. As of 2025, standard median income is about 6.09 million won for a four-person household, and the selection standard for livelihood benefits reaches about 1.95 million won, or 32% of that. For 2026, an increase in the 6% range for standard median income has also been decided, continuing the trend of expanding benefits.
In institutional trends, the main tasks that have emerged are ① discussions to legislate a relative poverty line (50-65% of median income) relative to standard median income, ② easing the compulsory supporter standard to resolve the non-recipient poor (blind spots), and ③ subdividing thresholds by household size in response to the increase in youth and single-person households. In addition, with the surge in single-person households and aging, the unit of 'minimum living guarantee' is trending toward the individual, and demands are growing that care, housing, and energy costs should be reflected separately. Now that the minimum wage has reached a level exceeding the Minimum Cost of Living, the focus of the debate appears to be shifting from 'guaranteeing survival' to 'resolving relative deprivation.'
Related Topics
- [[National Basic Living Security System]]
- [[Standard Median Income]]
- [[Minimum Wage]]
- [[Relative Poverty Rate]]
- [[Living Wage]]
- [[Near-Poor Class]]