[Viewpoint] Let’s think seriously about welfare

The welfare debate isn’t simmering down. In fact, it’s coming to a boil. Considering the maturity and advances of our economy and society, the discussion is a natural one and, in fact, may have started a little too late.

The conservative media have shifted their tone lately. They feature stories on welfare policy ideas that just a few years back would have been attacked as radical and socialist. The media, too, is undergoing its own conflict in values. On one page, they carry feature articles on the crisis in traditional capitalism, demanding calls for greater welfare benefits. On the other, they highlight the acute dangers of welfare profligacy by citing the ongoing crises in Greece and Italy. In his latest column, JoongAng Ilbo editorial writer Nam Yoon-ho pointed out that blaming welfare spending as the main culprit in the crises in southern European countries is an overstatement made by people who see what they want to see.

We should move beyond rigid ideologies when we discuss welfare and study the issue purely based on facts. Many of the country’s social indices are rapidly worsening. Statistics on income inequalities have gotten worse, while suicides and crime are rising fast. Such phenomena have been playing out since the mid-1990s. Income imbalances, worsening social indices and public angst in everyday lives in our society - they’re all related.

Globalization and changes in our economic environment may have played their part, but today’s social challenges are mostly the fallout of our present system. We therefore have to come up with new approaches to policies and our economic and political system. The deteriorating data has been crying out for a new systematic approach for more than a decade.

First of all, we need a stronger government role. The government must expand support to poor senior citizens and the impoverished class and for child care and education. The idea of income redistribution through the state should be promoted. The government will have to consider an overhaul in the tax system to boost both expenditures and tax revenues.

We also need to revamp our system. The gap in salaries seen between large and smaller companies, and permanent and part-time workers, has been widening fast. To stop the growth of contract, nonpayroll hiring, large companies must allow more flexibility in permanent jobs. It is strange that the incumbent conservative government has not done more to encourage such flexibility in employment.

The income gap among self-employed businesses has also been accelerating. The gap between top and bottom income classes is widening, while the middle class is shrinking. According to a recent household income survey, the number of people with incomes less than half the average level increased to 12.5 percent in 2010 from 7.1 percent in 1970. The population earning more than 1.5 times the average grew to 20.0 percent from 17.5 percent. The middle class has shrunk from being 75.3 percent of our society to 67.5 percent.

The gap in education expenditures is even wider. Inequality in educational opportunities in the long run can undermine social mobility for Koreans. The state and society must do more to help young people get educational opportunities, even if they’re not middle class or rich.

But the government can’t do everything, as the economic calamities in Europe demonstrate. It’s easy to boost welfare spending but extremely hard to reduce it. Welfare systems must be improved and expanded prudently and incrementally.

Globalization will continue and competition in the global community will only get fiercer. The corporate sector also cannot handle excess welfare costs. To boost welfare spending, the government will have to collect more taxes from companies and individuals. In the end, companies could reduce hiring and the economy could lose vitality.

It is best that the welfare increases come from the private sector. Personal donations should be encouraged. If the wealthy share their riches with less fortunate people, the effective demand in the economy could increase, helping to boost growth.

Professor and software mogul Ahn Cheol-soo raised a ruckus with his pledge to donate his wealth to help poor students get better education. His act should be commended rather than interpreted as political stunt. We should encourage - not discourage - philanthropic deeds for the good of our society.

*Translation by the Korea JoongAng Daily staff.
The writer is a professor of economics at Sogang University.

By Cho Yoon-jae