[Viewpoint] The doomed welfare equation

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[Viewpoint] The doomed welfare equation

Seocho District in southern Seoul has the highest number of post-graduate degree holders in Seoul for its population. It also earns the most local taxes in the city, as it is home to Samsung headquarters. But the district was also one of the first local governments to offer free child care and then exhaust its budget. While emergency aid from the city of Seoul saved the service from immediate suspension, the fix is not permanent.

The burden is heavier for the districts and towns with young residents and high fertility rates. Gyeonggi, which has fairly solid financial structures, is expected to face money problems by October because of the child care. Busan, Daegu and Incheon have already asked for help from the central government.

It is clear that the National Assembly did not consider the impact of requiring local and central governments to foot half of the expenses of the child care program when it was implemented.

While the cities with low financial autonomy claimed that they would not be able to afford the program, they could not avoid the reckless political movement for free welfare. The idea behind the free welfare benefits may be noble, but no plans were prepared to meet the increasing demand and raise the budget. The 18th National Assembly, which should have come up with follow-up plans, has dissolved.

Korea’s fertility rate is the lowest in the world. Every couple has 1.2 children, so the population is shrinking rapidly. Around 25 percent of the households are singles, and the average marrying age is above 30. The changes happened over four generations. The great grandparents’ generation had eight children, and the grandparents’ generation had four children. The parents’ generation had two children, and today’s young couples have only one child. So we are pleased to see pregnant women on the street. They are the patriots who keep the country’s population from shrinking. It may sound absurd to think about the nation and patriotism from pregnant women and infants, but it might as well be the best thing people can do to save the country.

This is where free child care should come in. It should encourage people to have children. But still, this does not justify the irresponsible policies to start free child care when child care facilities and funds are lacking. Because of the unrealistic and vain promise to provide free child care regardless of the income level, 340,000 children between ages 0 and 2 are on the waiting lists for private nurseries. It is getting increasingly competitive to get into popular nurseries and day care centers.

The welfare benefits should have been introduced more gradually. When the national and public facilities make up only 2 percent of all child care providers, anyone could predict that the demand would surge and the budget would run out.

Unlike other policies, welfare tends to gather speed. Once a benefit is offered, it is impossible to take it back. Unless the nation is on the verge of bankruptcy, an administration that takes away welfare benefits would have to suffer severely in popularity.

The free child care program is also gathering speed. The political parties estimate the budget shortage to be 600 billion won ($524 million), but the central government is willing to pay only 300 billion won.

For this reason and others, parents are upset and frustrated. Roughly 22 trillion won have been invested into the four-rivers restoration project, but politicians are fighting over several hundreds of billions of won when it comes to making a difference in our nation’s future. How about other free welfare promises? How will they be funded? Money comes from jobs. That’s the simple equation of welfare.

Employment is the source of income, and the corporate tax, income tax and local tax are the source of welfare. When there are not enough salaries on which to impose income tax, the government can sell national properties.

There are many assets to be sold: uninhabited islands, undeveloped hills, exhausted mines and deep-sea resources, to name a few. If these assets are not profitable, it might as well consider selling public properties. There are rumors that Greece is selling ancient relics and remains on the brink of bankruptcy. It may even sell the Parthenon.

The policy that adds jobs and boosts income is referred to as “employment politics,” and when this “employment politics” brings tax revenue, universal welfare can be funded properly.

In pursuit of fiscal soundness, British Prime Minister David Cameron recently cut down pension and unemployment benefits. The United Kingdom is busy taking away benefits, but Korea is still adding benefits that we can hardly afford.

Korea has an advantage as we can study the precedents in Europe and learn our lessons. We need to figure out how to fund the promises we have already made.

*The author is a professor of sociology at Seoul National University.
By Song Ho-keun
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