Social assistance reform in post-economic crisis Korea: The policy-making process of the

National Basic Livelihood Security Act

In-Young Jung

University of York

iyj100@york.ac.uk

Aim

• To explicate the driving forces of the social assistance reform in post-economic crisis Korea

• Focusing on the policy-making process of the National Basic Livelihood Security Act of 1999

The Structure of this presentation

• Introduction

• Economic crisis & social assistance reform in Korea

• Changing the structures of social assistance

• The policy-making process

• Conclusions

Introduction

• In 1999, social assistance in Korea which had had a Poor Law tradition for forty years was finally reformed

=> The National Basic Livelihood Security (NBLS) Act of 1999 that protects fundamental human rights, was enacted

• The law-making process of the NBLS Act was led by NGOs, not by the Govt

Economic crisis and social assistance reform in Korea

• Korea achieved impressive economic performance under the Developmental State (Gough, 2001).

• Unemployment and poverty had never been issues in Korean society.

Before the economic crisis of 1997

• Average unemployment rate – 3.2%• Average Gini coefficient – 0.29• Absolute poverty rate in 1996 – 3.1%• Relative poverty rate in 1996 – 11%(NSO, 2001a; Park and Kim, 1998; Park et al, 2002)

• The economic crisis had an important role in provoking public awareness of the poverty problem and the necessity for reform of the existing social safety net.

Trends in unemployment and poverty in Korea Source: NSO (2001b); Park (2000)

3.1

4.9

10.912.6 12.2

9.9 9.7 9.4

2 2.6

6.8

8.6

6.4 5.74.8 4.1

0

2

4

6

8

10

12

14

1996 1997 1998 1999Feb.

May. Aug. Dec. 2000

Perc

enta

ge

Poverty rate Unemployment rate

Number of social assistance beneficiaries (in thousands, rounded). Source: MOHW (2004);

Moon (2003)

1997 1998 1999 2000 2001

Total beneficiaries (A)

1,410 1,470 1,920 1,490 1,420

Cash assistance beneficiaries (B)

370 440 540 1,490 1,420

Total population (C)

45,954 46,287 46,617 47,008 47,343

A/C (%) 3.1 3.2 4.1 3.1 3.0

B/C (%) 0.8 0.9 1.2 3.1 3.0

Income distribution in Korea (%) Source:

NSO (2001a)

1st-3rd 4th-7th 8th-10th Gini Coef

1995 14.7 35.3 49.8 0.284

1996 14.3 35.3 50.4 0.291

1997 14.6 35.8 49.7 0.283

1998 13.2 34.6 52.1 0.316

1999 13.1 34.3 52.6 0.320

In the wake of the 1997 crisis

• Unemployment & poverty - a main social agenda needing urgent resolution

• Sharp increase in crime, divorce and suicide

• Considerable increase in homeless people

=> A threat to socio-political instability

The negative social impact has become greater

due to the relative neglect of the development

of institutions for social protection during the

decades of economic development.

⇒ The Govt was continually and strongly

requested by the IMF and civil society to

establish an adequate social safety net

Coping with the problems of soaring unemployment and poverty

• In 1998, unemployment benefit coverage was expanded to cover all workplaces including temporary or part-time workers but excluding day workers

• In 1999, a new social assistance law, the NBLS Act, which aims to secure minimum living standards for those eligible regardless of their age and ability to work, was enacted

Changing the structures of social assistance

• Benefits provided on the basis of social rights as a part of citizenship

• The demographic condition, under 18 and 65 and over, was abolished

• Housing Benefit has been newly established in the NBLS system

Work incentives

• Recipients for the NBLS system are required to seek work and are offered incentives to work

• Recipients capable of work required to participate in the Self-Reliance Assistance services

• Earnings disregards, which incomes generated by labour activities are partly deducted during income assessment procedures, are projected to be enforced nationwide in Korea from 2004

Benefit scale levels

• Based on the minimum living standards, which is defined as a ‘minimum cost of living’ required for citizens to maintain sound and civilized lives

• Surveyed every three years from 2004

• The results are publicly announced

The benefit rates

• To be set so that the total income of each household receiving social assistance benefits reaches the minimum cost of living

• In 2001, the minimum living cost was 49 per cent of the average consumption expenditure of urban households (MOHW, 2001)

Expenditure on social assistance (billion won). Source: MOHW (2004)

1998 1999 2000 2001 2003

LP/NBLS (A) 1,090 1,848 2,332 3,243 3,523

Social security (B)

4,576 6,105 8,074 10,746 11,572

Gov. budget (C)

75,583 83,685 88,736 99,180 118,132

A/B (%) 23.8 30.3 28.9 30.2 30.4

A/C (%) 1.4 2.2 2.6 3.3 3.0

A/GDP (%) 0.2 0.4 0.5 0.6 0.6

The policy-making process of the NBLS Act

• The Social Welfare Committee, under the PSPD, has pursued gradual, practical, and policy-oriented approaches to raise concrete points of issues, since its foundation in 1994.

• The spirit and the point of the NBLS Act originated from the professional-centred ‘national minimum movement, conducted by the PSPD (Moon, 2002).

The national minimum movement

Not successful:• The concept and logic of the term was not clear • The concept did not become a principle for reform

of social welfare

=> Brought about social and political interests in terms of the problem of securing the minimum living standard for low-income groups

The economic crisis in 1997

• A turning point for drawing the attention of people to the strong necessity of reform of the existing social safety net

=> One social issue rapidly emerged that resources should be distributed first to people with low-income

=> People who live in poverty should be entitled to a Basic Livelihood Security System provided by the state

Despite the strengthening of social protection by the Kim Dae-Jung Govt

• Temporary and stop-gap measures were not enough to stabilise living standards of low-income households

• Only those under 18 and 65 and over, and unable to work could claim social assistance… & the benefit levels had been set at a maximum of 60 % of the minimum living standards

=> Not only were a large proportion of poorer people not entitled to benefits, but also the unemployed worker with the capacity to work did not receive any benefits at all (Shin, 2000)

The policy initiative came from the PSPD

• Through a method of appealing to the general public, the PSPD attempted to develop the problem of enactment of the NBLS Act into a social policy issue but…

• The media showed a lukewarm attitude

• Political parties & Govt Depts were not concerned about the SA reform

New attempt by the PSPD

• 19 NGOs with the PSPD produced their own NBLS Act bill on 23 July 1998, and submitted the legislative petition to the National Assembly (NA).

• The bill became the present NBLS Act without substantial revision

• A series of social movements for passing the bill continued, centring around the PSPD, such as declaring the ‘National Right to Welfare’ on 26 Nov. 1998

The NBLS Act bill

• Passed the Legislative Bill Screening Small-Committee under the NA on Dec. 1998

• The Ministry of Health & Welfare had not expressed its position toward the bill because of the delivery system not in place (Lee, 2000)

• The economic ministries clearly opposed its introduction owing to the policy idea of avoiding welfare dependency and to the difficulties in financing the new SA programme (Ahn, 2000; Kwon, 2003; Moon, 1999)

Forming a new coalitionThe coalition of

64 NGOs

Civil rights NGOs

(the PSPD: Co-ordinating agency)

Religious groups

Labour organisations

Women’s groups

Low-income group organisations

Executive Committee Policy Committee

Chair: Rev. K. Song Chair: Prof. J. Moon

The coalition

• Aimed at securing the minimum standard of living for all citizens

• Aimed at establishing a social safety by enacting a NBLS act

• Conducted an organised nation wide movement for the enactment of a NBLS Act at national level, through a method of appealing to the general public

The coalition urged on the Govt & the National Assembly:

• a NBLSA should be enacted within the first half of the year

• the govt should announce an adequate level (as opposed to the present low level) of the minimum living standard

• the govt should increase the number of professional welfare officials (i.e. qualified social workers) in order for effective implementation of the NBLS Act (SENBLSA, 1999: 7)

Conflicts bet. the coalition & the govt

• The difficulties in financing - an estimated expenditure on a new SA programme was bet. 0.8 and 0.6 % of GDP (Moon, 1999)

• The policy idea of avoiding welfare dependency & workfare

• The chief control dept. MOHW had not shown a strong positive concern because of lack of the delivery system

Social assistance expenditures, 1992. Source: Eardley et al. (1996)

Aus Ger Jap Spa Swe UK US

Total SA as % of GDP

6.8 2.0 0.3 1.1 1.5 4.1 3.7

Cash SA as % of GDP

6.8 1.6 0.3 1.2 1.5 3.9 1.3

The coalition’s strategy

• Changed from approaching to the public into both the public and state elites such as the govt and political parties (Moon, 2002)

• The executive members of the coalition met core state elites, and explained and persuaded them of the necessity of the law (Ahn, 2000)

The public-oriented action plans revised

• Many statements issued by the coalition from Mar. to May 1999

• Leaflets produced to strengthen publicity activities• Education for residents living in low-income areas

who would be the real beneficiaries of the law was steadily enforced all over the country by local organisations who were members of the coalition

Coinciding with the coalition’s efforts…

• President Kim Dae-Jung’s announcement of the adoption of a NBLS Act

• The economic ministries did not oppose the law• The chief control ministry MOHW showed a

positive and active attitude toward it

=> The bill finally passed the NA on 12 August 1999

Conclusions

• The coalition of 64 NGOs was a main driving force behind the SA reform

• The determination of President Kim as the most influential high-level policy-maker in Korea was another important driving force

• Changes in the economic environment had an important role in provoking public awareness of the poverty problem and the necessity of the reform of the social safety net.

Conclusions

• Most social policy initiatives in Korea came from the top (Ahn, 2000; Kwon, 2003; Moon, 2002) but…

• The govt has been reluctant throughout the policy-making process of the NBLS Act

• Civil society in Korea has been considerably mature compared with the civil society under the previous authoritarian regimes

• => This Korean experience can help us have a deeper understanding of transitional East Asian welfare states or welfare regimes

Conclusions

• The NBLS Act has been evaluated as a landmark in social assistance breaking the Poor Law tradition

• Problems to solve still remain

- benefit levels

- effectiveness of the SA programme

- eligibility criteria (strong family obligations)

- administration and delivery mechanism,

- a workfare policy for able-bodied recipients