Rethinking Korea’s welfare
A crab is walking along a small pond. But it is walking straight ahead instead of its typical sideways approach. People crowd over the crab and marvel at the sight. The crab speaks out: “What? You’ve never seen a drunken crab before?”
I write this article with similar irritation and frustration. I want to beg the government and politicians to re-examine the universal social welfare system - specifically the fledgling and already floundering free school meal and day care programs.
I want to start with an angle that could irk both the liberals and conservatives. Our country has two major economic challenges: prolonged economic slowdown and income (or wealth) inequality. Deteriorating growth is the surest indicator of a maturing and slowing economy. The Korean economy has been underperforming even its modest growth potential for the last three years. Wealth polarization is, at the same time, also ever widening. The Gini coefficient, a measurement of income distribution, has gotten slightly better over recent years, but few believe the data. Even if the data reflects reality, most would agree that income discrepancies have worsened since the early 2000s. Few would argue against the idea that social welfare must improve in order to compensate for the gap.
Both conservatives and liberals worry about welfare spending. Korea’s welfare expenditures are way too small. Public welfare spending as compared to gross domestic product is less than half of the average of other countries in the Organization for Economic Cooperation and Development (OECD). A problem is in the speed of our increasing welfare spending. The pace of increases in Korea’s welfare spending since 1999 has been twice as faster as the average growth in OECD countries.
At its current pace, the country will soon reach a stage when it no longer can afford further spending. And how will it financing the spending? Conservatives and liberals differ in their answer to that question. Tax hikes would upset taxpayers. Financing through government debt could be a burden to future generations. People also differ on the tax option - which taxes should be raised? The easiest way is a higher levy on the wealthy. But that raises arguments of fairness, as taxes already mostly come from the pockets of the wealthier population. Already 5 percent of all working taxpayers shoulder 70 percent of income taxes and 5 percent of registered companies pay 95 percent of corporate taxes.
Few can argue about the paradox of a slowing economy and increasing polarization. Economic growth could be at risk if greater attention is paid to the distribution of wealth. The liberals argue that distribution should come before growth while the conservatives advocate the opposite. Still both sides would be happy if increased welfare could aid the economy. What’s needed is a welfare program conducive to the economy.
In conclusion, that would be a direction for welfare that would please both the liberals and conservatives. What is imperative is greater care for the poor. The low-income class must be entitled to a basic living standard. They also must be given opportunities to pull themselves out of poverty. We can’t afford young children who can’t study because there is no money in their homes. The elderly must not be neglected to shiver and die alone in the gutter. Investment should go to welfare that can aid economic activities. Young or jobless people who cannot find stable jobs should be able to get free or low-cost training to enhance their skills. Spending must go to revitalizing the labor market. Universal welfare programs that benefit the wealthiest should come last on the list.
Universal welfare is an ideal goal for any society. It must be our ultimate goal. But we do not have to achieve it now. We must prioritize in order to use our funds well. If the economy does not pick up speed, financing will only get more difficult. We will forever wrangle over the lack of funds to finance big welfare programs like free school meals and pre-kindergarten day care. We must be more selective in welfare spending to help both the people in need and the nation as a whole. A family that can afford to spend hundreds of thousands of won a month on expensive day care won’t be that grateful for a monthly subsidy of around 300,000 won ($283). That money is wasted on them.
In a recent poll, 92 percent said free school meals and day care didn’t help their household budgets much. The money would be better used to improve the lives of children of poor families. In short, we must prioritize welfare spending. We must apply the wisdom of opportunity costs in welfare spending to do the best within our national budget. We must reconsider the money-losing free school meals and day care programs.
JoongAng Ilbo, Oct. 16, Page 36
The author, former editorial writer for the JoongAng Ilbo, is an adviser at the Korea Institute of Finance.
by Kim Yeong-ook