Relief funds: Economic lifeline or temporary fix?

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Relief funds: Economic lifeline or temporary fix?

Published: 15 Oct. 2025, 00:01

Audio report: written by reporters, read by AI

Chung Un-chan

The author, a former president of Seoul National University, is the chairman of the Korea Institute for Shared Growth.

The Lee Jae Myung administration’s livelihood support fund program was a welcome relief for many struggling households. Traditional markets and neighborhood shops regained some life after the consumption coupons were issued, and ordinary citizens could finally breathe a little easier. Yet the question remains: Can such short-term relief address Korea’s deeper economic ailments of low growth and widening inequality? The answer is uncertain at best.

The reality was visible ahead of Chuseok. Prices for daily necessities and ceremonial goods surged well above previous years, prompting shoppers to lament that “even setting the holiday table feels daunting.” Soaring living costs have quickly eaten up the benefit of the support funds. Rent and housing costs continue to climb, and families with children face ballooning child care and education expenses. For many, the aid barely offsets inflation. Under such conditions, policies designed solely to boost consumption cannot resolve the structural distress facing low- and middle-income households.

Seoul citizens crowd a traditional market in Seoul on July 7, the day when the Lee Jae Myung administration announced public livelihood recovery coupons. [YONHAP]

The government’s decision to target the second round of support toward low-income families and rural residents was at least a step in the right direction. Recipients have spent the funds on essential goods, injecting cash into the local economy and fostering a sense of shared recovery. Still, the effect will be short-lived. What the country truly needs is not temporary cash handouts, but productive investment that can generate long-term growth momentum.

The program resembles the income-led growth strategy of the Moon Jae-in administration, which sought to strengthen domestic demand by raising wages and household income. That policy, however, raised costs for small businesses and produced few new jobs. It achieved neither sustainable growth nor fairer income distribution. If the current policy follows the same path, it too will falter. Structural challenges such as low growth and polarization cannot be resolved through direct cash support alone. Any income-based policy must be paired with innovation-driven growth and fair distribution strategies.

To avoid repeating the pitfalls of income-led growth, fiscal spending must operate within the broader framework of co-prosperity — a vision of balanced growth between large conglomerates and small- and medium-sized enterprises (SMEs). For decades, the Korean economy has suffered from structural dependency and profit gaps rooted in unfair trade practices. The profit ratio between large firms and SMEs can reach as high as three to one, undermining competitiveness in the very sector that creates most of the nation’s jobs. When corporate gains fail to circulate to subcontractors, workers and local economies, domestic demand stagnates, and growth momentum weakens. The result is a widening gap between large and small firms, the capital region and the provinces, and ultimately, between rich and poor.

Co-prosperity aims to break this cycle. It is not simply about redistribution but about creating a structure in which major corporations, SMEs and local economies grow together. The priority is to restore a virtuous cycle in which the growth of large companies spreads to smaller partners and ordinary citizens, whose increased consumption then sustains broader economic vitality.

Achieving this requires more than stimulating short-term consumption. Korea must ensure fair trade, encourage technological innovation, and expand social investment. Unfair subcontracting, price manipulation and technology theft must be eliminated. The government should introduce an excess profit-sharing system in which large corporations share a portion of surplus profits with subcontractors once a certain threshold is exceeded. If participation incentives are strong and the process transparent, profits can be distributed equitably based on each party’s contribution and negotiating power. Such cooperation would foster a fair and sustainable business ecosystem. Coupled with expanded public spending on education, research and development, child care and elder care, these measures would serve as productive investments for future growth.

A signboard outside a market in Dongdaemun District in eastern Seoul that reads government consumer coupons can be used. [YONHAP]

To reinforce structural balance, Korea also needs selective welfare that provides meaningful support for irregular workers, small merchants and other vulnerable groups. Providing high-quality essential welfare helps stabilize livelihoods while expanding consumption. In this way, livelihood support funds can evolve from one-time relief into sustainable welfare programs tailored to real needs.

The program has clearly helped sustain consumption and ease household burdens in the short term. But it cannot serve as a long-term economic cure. Korea requires not a temporary infusion, but a comprehensive restructuring to strengthen its economic foundations. Within the framework of co-prosperity, fiscal resources should be directed toward targeted welfare and social investment that empower the vulnerable and enhance economic resilience. Only then can the country move beyond low growth and inequality toward a truly inclusive prosperity — where all citizens grow together.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.