Half-baked basic income debates

Suh Kyoung-ho
The author is a business editor of the JoongAng Ilbo.

Koreans returned about 28.2 billion won ($23.3 million) in relief grants — about 1 percent of the 2.8 trillion won the Moon Jae-in administration had expected to be returned to state coffers. No matter how good an example the government tries to set, citizens will not follow it naively. Instead, they dispassionately calculated their gains and losses from forgoing the universal cash handouts.

If there is one thing that gained traction from the handouts, it is a heated debate on basic income. People support the idea across their political spectrum. A look at the history of the unconditional cash payment suggests why.

The payment system goes back to the 15th century book “Utopia” in which author Thomas More proposed basic income for everyone to maintain social order and prevent the poor from stealing. The thought was passed on to Enlightenment intellectual Thomas Paine, utopian socialist Charles Fourier, utilitarian John Stuart Mill — and to philosopher Bertrand Russell and conservative economists Friedrich Hayek and Milton Friedman in the 20th century.

Discussions on basic income have recently gained momentum in our world as scholars predict many jobs to be quickly replaced by the fourth industrial revolution. Former U.S. Democratic presidential candidate Andrew Yang created a buzz when he came up with a campaign promise to offer $1,000 per month to each American aged 18 or above.

Liberals support basic income on the grounds that it leaves no one behind and guarantees a minimum level of subsistence. Conservatives, on the other hand, pay attention to the concept as basic income can help reform existing welfare models and consolidate a social safety net.

Several thoughts come to mind as I witness the ongoing debate. First, Korea needs to start discussing the issue from a mid- to long-term perspective. As Robert Gordon, an economics professor at Northwestern University, pointed out, the real revolution is yet to come. That is why Korea should quickly prepare for the shocks in labor market, which will be caused by AI. So far, there seems to be a slim chance that more manufacturing jobs will be added in the market to cushion the loss of work from technological advancements.

Second, Korea must not dream about adopting a basic income system right away because the idea not only lacks practicality, but will stir up unnecessary controversy. Seoul Mayor Park Won-soon’s proposal to expand our unemployment insurance system first is more rational than the introduction of basic income in terms of protecting the socially weak.

How to prepare revenue for basic income will be the kernel of the issue. If Korea were to dole out 100,000 won to each citizen per month, the country needs 60 trillion won annually. Gyeonggi Gov. Lee Jae-myung, an avid populist, even claims that our welfare system should remain intact on top of the basic income. Lee’s plan is to provide everyone with 200,000 won per year and gradually build up to 500,000 won per year, consequently topping 6 million won annually through a tax hike. Lee stressed that the central government can finance basic income with its budget up to a certain level, and then increase taxes. Even the ruling Democratic Party is against his idea.

Third, Korea is in need of a political leadership that genuinely ponders the future of the nation. Basic income proposals set forth by LAB2050, an NGO, former Seoul Mayor Oh Se-hoon and Byeon Yang-ho, former director for economic policy coordination at the Ministry of Finance and Economy, mention ways to partially or entirely scrap existing cash welfare benefits. But current beneficiaries will strongly resist. Once started, welfare services are very hard to retract.

Fourth, Korea must run social experiments to determine the validity of basic income, because such projects requiring a staggering amount of budget should be backed by solid evidence of effectiveness. As was the case in Finland, we may not end up with a decisive answer after the social experiment. And yet we need to weigh the effect. The government must first scrutinize the effect of the 14 trillion won in relief grants in terms of stimulating domestic consumption.