A Comparative Analysis of the US and Korea
KDI/EWC series on Economic Policy
Edited by John Karl Scholz, Hyungypo Moon and Sang-Hyup Lee
Chapter 3: The social safety net in Korea: from welfare to workfare
Youngsun Koh discusses various policy options to improve the effectiveness of Korea’s social safety net, to secure long-term fiscal sustainability, strengthen the activation policy, target welfare programs at the most needy and delineate the respective roles of the central and local governments. Koh begins by discussing Korea’s income inequality. Korea experienced rapid economic growth up through the 1980s, while income distribution remained stable. The trend of inequality began to appear, however, in the 1990s, with a jump in the Gini coefficient from 0.245 in 1992 to 0.295 in 2009. Particularly vulnerable are the elderly, who represent roughly one-eighth of the total population. Koh then turns to the main features of the social safety net that has been developed in Korea since the 1970s, including health insurance, pension plans, employment insurance, public assistance, tax credits for poor households and active labor market programs. The author notes that, despite rapid spending growth, the social safety net has played a limited role in reducing poverty in Korea. He discusses three problems: gaps in the safety net, inadequate attention to activation policies and the inefficient delivery system.
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