Welfare doesn’t come free

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Welfare doesn’t come free

Korea’s suicide rate is by far the highest among the OECD member countries. According to a report last year by the Korea Institute for Health and Social Affairs, the OECD average is 12.8 suicides per 100,000 per year, while Korea’s suicide rate is 33.5. That is 10 more suicides than the second highest rate in Hungary, 23.3 suicides per 100,000. The statistics get worse: The suicide rate for people over 80 is 123 per 100,000 people and for people 90 and older it exceeds 129.

Why do so many people make such an extreme choice when they are old enough to have experienced various ups and downs in life and their ambitions should be mellowed? The report explained that the high suicide rates for seniors result from socioeconomic reasons, namely a drastic increase in both the elderly population and one-person households.

In short, they give up their lives because they cannot afford to support themselves and take care of their health. Also, they didn’t have any hope for the future. Soon, the baby boomers will become seniors. Just as the aging of our population is accelerating, society is clearly not yet prepared.

No doubt welfare is an unavoidable and urgent challenge, and it is not limited to the senior issue. In last year’s presidential campaign, the ruling and opposition candidates vied to offer hefty welfare promises to the general public. Cambridge University professor Chang Ha-joon advocates expanded welfare benefits to provide stability and maintain equality in our economy. He says people will ultimately go along with higher taxes to finance the welfare if they understand its importance as a foundation to society.

Weak welfare can lead to poor employment flexibility. Korea’s welfare is half the OECD average and without improving the welfare system, Korea may not be able to surpass certain limitations to its growth.

Considering the current situation, the latest controversy over income tax increases is regrettable. The government’s tax plan should not have been abandoned so easily. The government immediately succumbed to salary earners’ outrage over a very modest increase in their tax bills. Of course, if the discussion lasted too long, it could have led to an exhausting debate.

In that sense, President Park Geun-hye’s political determination is highly laudable. But with the decision, she has opened herself up to many new challenges. This is only the beginning of her attempts to keep her welfare campaign pledges, which would cost a whopping 135 trillion won ($120.9 billion) over the next five years. With such a feeble beginning, how can she deal with such a daunting challenge? In the first half of 2013, the country’s tax revenues were 9.3 percent lower than a year earlier. Can tax revenues really be secured without increasing taxes?

We must use this opportunity to review the welfare issue. If possible, we need to reach a social consensus. We mostly agree that welfare improvements cannot be avoided. Nevertheless, politicians are distorting the issue instead of pursuing serious discussions. For instance, the opposition Democratic Party advocated expanding welfare by 193 trillion won over five years, which would have required a tax hike. But they criticized this government’s plan to increase taxes on the middle class as a “tax bomb.”

Welfare policies have to be led by the politicians. However, they can find themselves painted into a corner if they make vain promises to win elections. Once a welfare policy is implemented, it cannot be stopped or changed. A long-term blueprint should be drawn to establish the structure of welfare based on philosophy and legal framework. When welfare promises are impulsively made to win votes, urgent welfare challenges cannot be addressed properly. Promises that are made without taking the cost into account may bring tremendous disasters.

Welfare is not free. The typical lie of politicians is a promise to offer anything without admitting that someone will have to pay for it. They always say they will afford the promise by reducing “unnecessary spending.” Easy promises are the ones to be most suspicious of. Moreover, welfare is not limited to one administration. Once the bandwagon takes off, it continues into the next administration and the next. What we really need is to review the welfare promises and sort out the ones that are not essential and not urgent.

Is it OK to divide the population into the 99 percent versus the 1 percent? The average Korean versus the rich? It help wins votes, for sure. If the state turns into Robin Hood, who would invest in Korea? Currently, only 11.5 million of the 25 million economically active citizens pay income tax. As a result, the highest 20 percent of income earners pay 85 percent of our tax. Compared to the OECD average, the bottom 80 percent is paying less than it should.

If welfare is necessary, we have to be honest about taxes. They’re necessary to pay for it. Perhaps the Park administration is cut out for the job of finding a compromise. The administration should be frank about welfare and tax issues. Because of Park’s election promises, the government attempted to meddle with the income tax, only to find instant resistance. If they want to change the taxation system, the sales tax and the system in general should be reviewed.

Some analysts oppose tax increases during an economic slump. Others argue tax revenues should be increased through growth, not by tax hikes. But we need to reconsider putting a greater burden on our taxpayers. In any case, this government - any government - needs to first admit that welfare has to come from taxes.

*The author is the chief editorial writer at the JoongAng Ilbo.

by Kim Jin-kook
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