Korea’s welfare expenditures lag at 1/10 of GDP

Korea’s spending on social welfare remains less than half that of other advanced countries’, a sign that spending in this area has not kept pace with economic growth and the increasing number of people whose income falls beneath the poverty line.

A study published yesterday by the Korea Institute for Health and Social Affairs showed that the country’s total spending on social welfare amounted to 112.1 trillion won ($96.9 billion) in 2008, about 10.9 percent of its gross domestic product that year.

The figure covers not only welfare spending by the government but also charitable contributions by individual donations, corporations and religious or other nonprofit civic groups.

The number falls far short of the average 23.7 percent spent by all member nations of the Organization of Economic Cooperation and Development, according to Ko Kyung-hwan, the author of the study. Korea ranked second-lowest in welfare spending among OECD countries, next to Mexico, whose total spending amounted to only 7.6 percent of its GDP. Sweden and France topped the list, with welfare spending accounting for more than 30 percent of their economies.

The study also indicated the Korean state contributes only 8.3 percent of its GDP, with the rest of the money coming from nongovernmental contributions. Because government spending does more than charity to narrow income disparities, the numbers call into question the efficiency of Korea’s welfare spending. The average government spending among OECD member nations was 20.6 percent, more than twice Korea’s.

“Countries such as Sweden and Germany, where the government’s welfare spending has a relatively bigger presence compared to its GDP value, have a smaller income gap and lower poverty rates among the elderly,” said Ko.

“But countries such as Korea, Britain and the United States, whose governments spend less on welfare, have a relatively higher income gap.”

Ko said Korea and the United States especially showed higher poverty rates among the elderly - 45.1 percent and 23.6 percent, respectively, compared to 6.6 percent in Sweden and 9.9 percent in Germany.

“Now we see more and more cases of poverty among the elderly and the working poor,” said Ko. He stressed that, lacking a social safety net, even average families fall into poverty if a breadwinner loses his or her job.

But in a sign of hope that Korea is increasingly catching up with other advanced countries’ welfare spending, total social welfare-related spending here has grown an average of 10.8 percent each year from 2004 to 2008, far faster than the average growth of 4.9 percent among OECD member countries.

By Jung Ha-won [hawon@joongang.co.kr]