Kyo-seong Kim (Ph.D.)

Chung Ang University

Performance of Korean Welfare System in the DJ Administration

Introduction

1. Background

• Areas of social welfare policy have experienced sweeping changes under the DJ Administration.

• In general, this welfare reform have received positive evaluations.

• The welfare reform under the DJ Administration should be evaluated as astonishing as welfare innovations achieved in the UK in the latter period of the Second World War and in the US during the Great Depression (Sung, 2001).

• If the welfare reform is continued, Korea could be the first country to start from an underdeveloped country after the Second World War and enters the welfare state (Kim, 2005).

Introduction

2. Major Purpose

1. Examine contents of welfare reform under the DJ Administration.

2. Analyze efforts for expansion of state welfare and results based on two dimensions of time and space.

3. Evaluate DJ Administration’s welfare reform.

Methods

Social Welfare

Expenditure

Social Welfare

Expenditure

PovertyRates

Gini Coefficients

PovertyRates

Gini Coefficients

Cluster

Analysis

Cluster

Analysis

Coverage

Benefit level

Examine contents of welfare reform

Analyze Efforts & Results

Evaluate welfare reform

Compare before & after

Compare Korea with other Advanced Countries

Welfare Reform in the DJ Administration

1. Coverage Expansion

(1) Expansion of National Pension Scheme (NPS) to the entire population.

(2) Expansion of Employment Insurance (EI) and Workmen's Accident Compensation Insurance (WACI) to all work places with less than one employee.

2. Extension of Benefit Level

(1) Extension of unemployment benefit period. (2) Increasing the amount of benefit in EI & WACI. (3) Reduction of replacement ratio in NPS.

3. Enactment of National Basic Livelihood Security Act

(1) Revocation of demographic criterion in the eligibility test.

(2) Introduction of conditional recipients based on the idea of workfare.

(3) Extension of benefit level.

Welfare Reform in the DJ Administration

Government Budget in % of General Account

Source : Ministry of Health & Welfare (www.mohw.go.kr)

0

2

4

6

8

10

12

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Social security Ministry of Health & Welfare

0

5

10

15

20

25

30

35

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

SD Cor Li b Korea Mexi co Turkey

Social Expenditure in % of GDP

Source : OECD (2004) Social Expenditure Database, 1980-2001 (www.oecd.org)

Social Expenditure by Major Policies

Source : Ministry of Health & Welfare (www.mohw.go.kr)

0

2

4

6

8

10

12

1987 1992 1996 1997 1998 1999 2000 2001 2002

Social Insurance Public Assistance Social Service

Coverage Expansion

Source : ILO (1992) International Labour Conventions & Recommendations, 1919-1991 (Recommendations 102, 103, 128, 130, 134, 168, 176)

Data : Korean National Statistics Office (NSO), Corporations of Social InsuranceNotes : E : Employee, EAP : Economically Active Population

6

7

8

9

10

11

1996 1997 1998 1999 2000 2001 2002

Pre- transfer Income Post- transfer Income

Poverty Rates

Data : NSO (1996-2002) Income & Expenditure Survey of Urban Households

Notes : Setting the poverty line at 50% of median income.

0.25

0.27

0.29

0.31

0.33

0.35

1996 1997 1998 1999 2000 2001 2002

Pre- transfer Income Post- transfer Income

Gini Coefficients

Data : NSO (1996-2002) Income & Expenditure Survey of Urban Households

0

10

20

30

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

1990

2000

AUS CAN FI N FRA GER I TA J AN NED NOR SWE UKG USA

Poverty Rate, Di sposabl e I ncome Eff ects of Tax & Transfer

Effects of Tax & Transfer in Reducing Poverty

Source : Föster & D'Ercole (2005) Income Distribution and Poverty in OECD Countries in the Second Half of the 1990s (www.oecd.org)

Clustering

Method : Cluster analysis with z-scores of social expenditure(%), maturation of social insurance(year), relative poverty rate(%), gini coefficient, using the method of ward linkage, squared euclidean distance.

1995 2003

Conclusion

Findings

• Efforts and results for expansion of state welfare are worth recognizing in some degree.

• However, the level of state welfare is still lagging behind compared with those of advanced countries.

Discussions

• More radical changes such as enactment of family allowance and sickness allowance are needed.

• More development in social service area is necessary.