Avoiding responsibility

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Avoiding responsibility

The expenses caused by the sharp expansion of welfare programs under the Moon Jae-in administration have started to arrive. According to a study by the Korea Employers Federation (KEF), the total costs of state welfare benefits topped 110 trillion won ($98 billion) last year — 50.4 trillion won of which went to health insurance costs — which expanded under the Moon administration.

These welfare increases are the fastest among developed nations. Individuals’ contribution to social security amounted to 6.9 percent of Korea’s gross domestic product (GDP) in 2016, still below the 9.2 percent average of the members of the Organization for Economic Cooperation and Development (OECD).

But costs’ rate of increase has been 25.7 percent for Koreans from 2010 to 2016, much faster than the OECD average of 3.5 percent, 1.5 percent in the United States and 13.2 percent in Japan. Individuals’ burden went up sharply in a relatively short period of time to finance a dramatic surge in populist programs on top of necessary spending for Korea’s aging population. That makes people’s lives harder due to the long-running stagnation of incomes. The generous fiscal spending has mostly come from the pockets of taxpayers.

Individuals’ burden, relative to Korea’s GDP when adding tax and social security costs, is projected to shoot up to over 30 percent next year and hit 34 percent after 10 years. Households will find it hard to make these burdensome payments. People today cannot enjoy various benefits at the expense of future generations. Those enjoying the benefits now must pay for them.

The government has been deluding the public by promising stronger welfare while keeping mum on tax increase. The government must either moderate the pace of its increase in welfare spending or persuade the public that increased benefits require more contributions from taxpayers. But the government has not shown such a responsible attitude.

For instance, the National Pension Service is running out of money because it is structured to pay out more than it received in contributions. No pension can offer benefits with small premiums. Instead of being honest with the public, the government has laid out four options to pick to avoid accountability for the backlash.

To strengthen social security, Korea will inevitably have to increase welfare. But at the same time, we must not go down the doomed path of the Greeks after years of reckless spending: the government is putting its head in the sand if it really thinks that it can provide greater welfare without laying the burden on the people.

JoongAng Ilbo, Dec. 26, Page 30
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