Household Downsizing, Poverty-Rate Illusions and Substantive Deprivation: Evidence from Korea, 2014–2024

Background and Purpose: Demographic change is reshaping not only who is poor but also how poverty is measured and interpreted. Korea provides a critical case, with rapid population aging, very low fertility, and one of the fastest increases in one-person households among OECD countries, alongside persistently high measured old-age poverty.

Methods: Using nationally representative microdata from the Household Finance and Living Conditions Survey (2014–2024), this study asks to what extent recent increases in relative poverty reflect substantive deprivation versus mechanical effects of household composition. We focus on the standard relative poverty headcount, defined as the share of individuals below 50 percent of median equivalized disposable income, and examine how changes in household structure alter this indicator over time. We first classify households into nine types defined by size and age composition and document pronounced shifts toward smaller and older households. We then implement a DiNardo–Fortin–Lemieux-style counterfactual reweighting procedure to impose the 2014 household-type distribution on 2024 incomes, and apply a Das Gupta variant of the Kitagawa decomposition to separate changes in overall poverty into composition and within-type components.

Results: Our results show that within-type poverty declined for all household categories over 2014–2024, yet the aggregate relative poverty rate increased by 2.46 percentage points. Composition effects account for +3.55 percentage points of this change, while a poverty-line shift (−1.02 points) and a small residual interaction term (−0.07 points) partly offset this contribution. In other words, demographic shifts in household structure explain roughly 144 percent of the observed increase, indicating that a rising headcount can occur even in the absence of any deterioration—and indeed alongside improvement—in within-group income distributions.

Conclusions and Implications: We refer to this pattern as a “poverty-rate illusion”, as average household size shrinks, the equivalence-scale-adjusted poverty line moves up mechanically. So that statistical poverty can rise even when real resources or social spending do not worsen. At the same time, our analysis of private inter-household transfers shows a contraction consistent with household downsizing, implying genuine welfare losses among older adults and other vulnerable groups that are not simply measurement artefacts. Together, these findings highlight the need for composition-sensitive poverty indicators and for social work and social policy responses that distinguish between statistical illusions and substantive poverty. In particular, we argue that income-maintenance and social care strategies must pay closer attention to one- and two-person vulnerable households in rapidly aging societies like Korea.