International Policy Centre for Inclusive Growth

YoonKyung Kwak

28th of September 2011

South Korea’s Experience in Social Protection

Contents

1. Overview of Korea2. The Evolution of the welfare state in

Korea 3. Korean social security at a glance 4. Economic development in Korea5. The underlying two main ideas in social

policy 6. Welfare reform after the financial crisis

in 19977. The social policy through the 2008

recession8. Comparison of the impact of the two

crises on social welfare system

IPC-IG UNDP BRAZIL

Overview of Korea1 Location:Southern part of the Korean peninsula in North-East Asia

Climate:Four distinctive seasons; a humid continental climate

Population :48,875,000 (2010 est.)

GDP (nominal) : $ 22,961 billion (2011 est.)

Source: IMF (2011)

2

Economic Crisis and

Social Policy

Developmental Welfare

State

Democratization and

Social Policy

Rescaling the development Welfare State

The Evolution of the Welfare State in Korea

Korean Social Security at a glance 3- National Pension Programme (1960)- National Health Insurance (1963)

- Employment Insurance (1995)

- Industrial Accident Insurance (1963)- Long-term Care Insurance (2007)

- Welfare for the elderly, the disabled,

children, women - Medical or

Psychiatric Social Work

-National Basic Livelihood Security Act - Medical Aid

Economic Development in Korea 4

Source: www.2Mminutes.com

•Export-oriented industrialization with the state-directed government-big conglomerate-bank nexus

•Expansion of the world economy with relatively protected domestic market

•Cheap workforce with a high level of education

Economic Development in Korea The Sharp Decline of the Poverty Reduction 4

Source: Suh (1979) & Suh and Yeon (1986)

A: The absolute poverty line is defined as 121,000 won per month in 1981 for a five-member family. B: The relative poverty line is defined as one-third of the average household income in a given year.

Economic Development in Korea Human Development Index (HDI)

4•Increasing Standard of Living – positive changes in the literacy rate, school enrollment, the infant mortality rate, life expectancy, and other human development indicators as well

The Underlying Two Main Ideas in Social Policy Welfare Developmentalism

5

Two Underlying Main Ideas in Social Policy

Welfare Developmentalism – Land Reform 5

Two Underlying Main Ideas in Social Policy Confucian Familism

5

Welfare Reform after the Financial Crisis in 1997 6

-Impact on even conglomerates, resulting in bankruptcy for half of the major 30 giant companies, including financial institutions

- dramatic rise in absolute poverty and unemployment

Welfare Reform after the Financial Crisis in 1997 6

Welfare Reform after the Financial Crisis in 1997 6

Welfare Reform after the Financial Crisis in 1997 The Problems of the National Basic Livelihood Security Act

6 Arbitrariness - A major problem of the market basket approach - Korea : 370 items are selected and calculated to determine the composition of the baskets, which means that there is a high possibility of the expert researchers making value judgments concerning the items to include their volume, price and durability etc - A single institution, the Central Living Security Commission, decide the level of the minimum cost of living in Korea

The realistic level of benefits needs - Underestimation of the benefits - One notable NGO, People’s Solidarity for Participatory Democracy, has launched a campaign, so called ‘Living a month with the minimum cost of living’, to raise awareness of the seriousness of the current system.

Welfare Reform after the Financial Crisis in 1997 The Poverty Rate using the Absolute and Relative Measures

6Year The

Minimum Cost of Living

40% of Median Income

50% of Median Income

60% of Median Income

2003 a 10.0 9.9 14.7 20.1

2004 a 9.6 10.3 15.0 21.0

2005 a 10.5 10.8 15.3 21.4

2006 a 10.0 10.8 15.4 21.3

2007 a 9.7 10.5 15.3 21.1

2008 a 10.0 10.4 15.0 20.6

2006 b 11.1 11.8 16.5 22.1

2007 b 10.8 12.0 16.5 22.2

2008 b 11.4 12.2 16.9 22.2Source: Kim et al. (2008) a: except for one-member household and farm and fishing householdb: include one-member household and except for farm and fishing household

The Social Policy through the 2008 recession

7-The impact from the 2008 crisis was relatively smaller Because… the economic crisis in 1997 allowed the government to take proactive action to deal with the financial crisis in 2008

Current Social Policy IssuesInequality and Redistribution - a marked rise in income inequality due to a growing segmentation between regular and non-regular workers - income redistribution becomes on the government’s policy agenda

Controversy over a rising social spending

Demographic transition - low fertility and aging population

Heated debate on free lunches for elementary school students in Seoul - welfare has become a real issue for the first time - this issue has brought Korean, not just Seoul citizen, into discussion on a comprehensive welfare state => A welfare policy debate goes to big controversial political issue

Comparison of the Impact of the Two Crises on social welfare system

8The financial crisis in 1997 - A negative impact on Korean economy was a driver to draw a structural reform of social welfare policy - selective welfare state

The recession in 2008 - New social risks such as demographic change, growing income inequality and shifted labour market has led a change of the welfare state in Korea - A strong voice from the bottom of society has contributed to expand the welfare state - Towards a comprehensive welfare state

Bibliography

* Asian Development Bank Institute (2011) Available at: http://www.adbi.org/ * Goodman, R. and Peng, I (1996) ‘The East Asian Welfare States: Peripatetic Learning, adaptive change, and nation-building’, in G. Esping Andersen (ed.), Welfare state in transition: National adaption in global economies. London: SAGE. * Kim, T.W., Choi, H.S., Yang, S.H. and Woo, S.H. (2008) 2008 Poverty Statistics Yearbook. Seoul: KIHASA * OECD (2011) A framework for growth and social cohesion in Korea, [Online]. Available at: http://www.oecd.org/dataoecd/37/2/48225033.pdf * Suh, S.M. (1979) ‘The Patterns of Poverty in Korea’, Working Paper, 7903, [Online]. Available at: http://www1.kdi.re.kr/kdi/report/report_read05.jsp?1=1&pub_no=699 (Accessed: 27 June 2011).* Suh, S.M. and Yeon, H.C. (1986) ‘Social Welfare during the Structural Adjustment Period in Korea’, Working Paper, 8604, pp. 1-40, [Online]. Available at: http://www1.kdi.re.kr/kdi/report/report_read05.jsp?1=1&pub_no=760 (Accessed: 26 May 2011).* UNDP (2010) International Human Development Indicators http://hdrstats.undp.org/en/countries/profiles/KOR.html

* Yang, J-J. (2011) ‘Another Exceptionalism?: Comparative analysis of the small welfare state in Korea’, 61st Political Association Annual Conference Transforming Politics: New Synergies. Novotel London West, UK, 19-21 April, [Online]. Available at: http://www.psa.ac.uk/journals/pdf/5/2011/1283_694.pdf (Accessed: 26 September 2011)

Thank You