Growing Cash Welfare Needs Reassessment

The budget for direct cash-support programs in next year’s government budget proposal amounts to KRW 54.3017 trillion, a 12.5% increase from this year. The year-on-year growth rate of this direct cash-support budget has also shown a steep upward trend, reaching 14.9% in 2018 and 16.6% in 2019.

Riding the Moon Jae-in administration’s policy direction of “universal welfare,” local governments are likewise expanding cash-based welfare policies. Under Article 26 of the Framework Act on Social Security, when the head of a central administrative agency or a local government establishes or changes a social security program, consultation with the Ministry of Health and Welfare’s Social Security Committee is required.

Until 2017, the Social Security Committee often blocked program expansion by issuing decisions of non-consent. But from 2018, the process was changed so that instead of non-consent, cases would go through re-consultation and coordination procedures, and this has led to more local government welfare programs being expanded. Among the welfare programs newly established last year and this year, those characterized as cash-based welfare are estimated to account for about 68%.

With elections coming up next year, local governments are competitively handing out cash-based welfare policies, prompting criticism that this amounts to “soliciting votes from voters.”

Above all, cash-based welfare policies are spreading competitively across ministries and between the central and local governments, yet there has been no proper evaluation of their efficiency or sustainability.

When central and local government programs overlap, or when welfare policies duplicate existing programs, their effectiveness is bound to remain unclear. In addition, given the differences in fiscal self-reliance among local governments, controversy over welfare equity between regions is inevitable.

Birth incentives provided by region may help attract people into a particular area, but serious discussion of how much they actually raise the national birthrate has been omitted.

According to the Jeonnam Provincial Council, a 2017 survey found that over the previous five years, 1,584 people in 22 cities and counties received birth incentives and then moved to other regions. As populations decline and central government support shrinks, this is why some mockingly say that local governments are competing out of sheer survival.

The central government, which under the previous administration had taken a negative stance toward youth allowances, is now leading the way in introducing them. It says, “We will support unemployed young people within two years of graduation who fall into the blind spot of youth employment policy,” but those receiving support through employment package programs provided by the government or local governments are excluded.

In effect, this creates a structure in which young people who are actively seeking work are reverse discriminated against. Now that the government is taking the lead, other local governments are rushing to introduce similar systems as well. Some local governments are even saying they will support “youth” up to age 45, yet no brake is being applied to the policy.

At a debate held last October by the Special Committee for Grand Welfare Compromise under the National Council of Mayors, County Heads, and District Chiefs, concerns were raised that the reckless proliferation of cash welfare policies among local governments could lead to mutual ruin.

The argument was that if some local governments with strong fiscal conditions implement populist cash welfare policies, welfare among citizens becomes differentiated, while other local governments come under pressure, ultimately fueling conflict between local governments.

Cash-based welfare policy is an easy form of welfare policy that catches voters’ eyes.

But one-off welfare policies merely shift the burden into debt and postpone responsibility onto future generations. What young people need is not “allowances” but “jobs.” The government’s role is to create a virtuous cycle in which economic revitalization increases jobs and, through that, improves distribution.

Younghoon Kim

Secretary General, Economic Knowledge Network

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Original title: 늘어나는 현금성 복지, 재검토가 필요하다

Author: Young-hoon Kim

Date: 2020-01-06

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=23&idx=22257