Too much free money

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Too much free money

A council of mayors and district heads across the nation launched a special committee on “welfare consensus.” The aim is to root out money-losing welfare programs — mostly cash handouts. Korea must improve its social welfare, which provides benefits below the average of the OECD. But reckless competition in welfare programs can be disastrous for a nation. It is positive to see local government heads joining forces to address the problem.

Suwon City Mayor Yeom Tae-young chairs the special committee that will formally launch in June by including welfare, public finance and conflict control experts, as well as civilian representatives. The panel will study the cash welfare programs provided by each local government and draw up an advisory report in hopes of developing a grand consensus on welfare programs.

They plan to apply a sunset clause on existing cash subsidy programs that have not produced desired effects for a year. It will try out new ones for two years and scrap them if they do not have any effect. The consensus of the local administrative heads will be announced before the next local elections in 2022.

Over 668 new welfare programs costing the local governments 478.9 billion won ($404 million) of budgetary funds were introduced last year. Nearly seven of them (66.7 percent) totalling 227.8 billion won were in the form of cash handouts. Competitive subsidies have increased welfare inequalities as they reflect the tax revenues of the administrative jurisdictions. Residents began to ask whether they should move in order to receive benefits in other areas.

For instance, residents aged 65 or older in a certain apartment complex get 100,000 won a month depending whether their apartment is in Sindang-dong, Jung District, or Wangsimni-dong, Seongdong District, as the residential complex spans the two administrative jurisdictions with a different set of welfare programs.

Although the voluntary restraint is welcoming, the move does not have a binding force. Chong Won-o, the Seongdong District head and a secretary general for the preparatory committee, said the panel will propose the central government impose penalties if the new rules are broken. The central government had been negligent in overseeing or refereeing the competition on welfare spending by local governments. It must act in a balancing role to ensure efficacy in tax spending.
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