Social Welfare in Korea Young Jun Choi Dept. of Public Administration Korea University
Contents Introduction Characteristics of social welfare in Korea Socio-economic changes Welfare developments Cases of pension and unemployment benefits
Korea as Confucian welfare states? Confucianism Beyond the wife-husband relationship Married women Seniority Eldest son From Catherine Jones (1990, 1993) to Rieger and Leibfried (2003) Underdeveloped formal systems of social security Low levels of government investment in social policy Fundamental importance of the family, e.g. filial piety, and community-based social safety-nets
Korea as Confucian welfare states? Criticism Panacea? Buddhism or Christianity Cannot capture recent dynamic social changes and social policy development Rather, exploited by politicians as a political rhetoric (Walker and Wong 2005)
Developmental regimes: context One-party domination: LDP- Japan, RP-DJP in Korea, KMT in Taiwan, China, Singapore Authoritarian developmental states Bureaucratic autonomy (in key economic sectors) Highly restricted democratic movements State-exercised financial control over the economy
Developmental regimes: context State-led and export-oriented growth Favoured government treatment to private sector organisations, Such as trading companies and industrial conglomerates High debt-equity ratio in Japan (342% in 1982) and Korea (385.8%) whereas very low in Taiwan (78.1%) : policy loans vs. tax policy Favourable international environments for exportoriented policy with protective domestic market, particularly provided by the United States
Developmental regimes: context Full employment labour market Life-long/full-time employment practice Strong male-breadwinner model Seniority rule of promotion Three-generation family Demographic structure Young demographic structure Decreasing but still stable fertility rate
Developmental/ Productivist welfare regimes Developmental welfare states (Tang 2000, Kwon 2005), Productivist welfare regimes (Holliday 2000, 2005, Gough 2004) Fourth welfare regimes added to The Three Worlds of Welfare Capitalism Strategic use of social policy as a means of state-led industrialization Low levels of taxation and social expenditure Small public welfare bureaucracies Governmental hostility to the idea of the redistributive function of welfare state Subordination of all aspects of social policy to economic objectives
Still Deveopmental/Productivist regimes? Welfare development not shaped by economic reasons but by satisfying social needs since the 1990s: 1) long-term care insurance in Japan/Korea/Taiwan, 2) pension/ heath/unemployment insurance and new public assistance in Korea and Taiwan Independent from economic policy Productivist nature and workfare-style welfare programs: Any difference with liberal welfare-state regimes or welfare retrenchment in Europe? From development states to post-developmental states
Post-developmental regimes Declining the developmental states Democratisation International pressure: open your economy and fix unfair trade practices Growth of conglomerates: tensions with governments Difference between Korea and Taiwan
Post-developmental regimes Political democracy Economic recession and crisis End of full employment (life-long) labour market with post-industrialisation Rapid demographic change Diminishing role of family and enterprises in welfare provision
Rapid ageing in Korea (Choi 2006) 12
Ageing ratio Demographic Change Dependency Ratio 40 35 30 25 20 15 10 5 0 1980 1990 2000 2010 2025 2050 Taiwan Korea HongKong Japan US UK China Year Source: NSO (2004), Moon (2005), UN (2005)
Total fertility rates (source: OECD) 1970 1975 1980 1985 1990 1995 2000 2005 2010 France 2.48 1.93 1.95 1.81 1.78 1.71 1.87 1.92 1.99 Germany 2.03 1.48 1.56 1.37 1.45 1.25 1.38 1.34 1.39 Japan 2.13 1.91 1.75 1.76 1.54 1.42 1.36 1.26 1.39 Korea 4.53 3.43 2.82 1.66 1.57 1.63 1.47 1.08 1.12 Sweden 1.94 1.77 1.68 1.73 2.14 1.74 1.55 1.77 1.98 United Kingdom 2.43 1.81 1.9 1.79 1.83 1.7 1.64 1.79 1.98 United States 2.48 1.77 1.84 1.84 2.08 1.98 2.06 2.05 1.93 OECD average 2.71 2.38 2.14 1.89 1.86 1.69 1.65 1.62 - China 5.78 3.39 2.54 2.36 2.1 1.92 1.89 1.81 -
Old-age support (ages 60 or over) by family in Korea (unit: per cent) * 2008: co-residence rate 28.6% Live together with children? Supporting costs? Yes No Family support Self-support 1984/1988 77.7 20.9 72.8 32.0 1994 * * 62.1 37.6 1998 54.5 44.9 58.2 41.6 2002 42.7 56.7 53.3 46.3 Source: Kim and Choe (1992), NSO (2004)
Change of employment by income groups (93-04)
Temporary employment (% of wage employment), Self-employment (% of total laborforce (OECD 2012) 2006 2007 2008 2009 2010 2011 Germany 14.52 14.64 14.72 14.54 14.67 14.69 Italy 13.14 13.21 13.32 12.46 12.76 13.36 Japan 13.97 13.86 13.62 13.71 13.75 13.72 Korea 25.36 24.74 23.67 26.05 23.02 23.76 Netherlan d 16.62 18.08 18.17 18.25 18.5 18.39 Spain 34.04 31.66 29.26 25.4 24.91 25.33 Sweden 16.77 17.45 16.05 15.25 15.79 16.37 UK 5.81 5.85 5.43 5.66 6.11 6.18 OECD Average 12.17 12.21 11.95 11.79 11.88 11.99 1990 2000 2005 2010 Germany.. 11.0 12.4 11.6 Italy 28.7 28.5 27.0 25.5 Japan 22.3 16.6 14.7 12.3 Korea 39.5 36.8 33.6 28.8 Netherland 12.4 11.2 12.4.. Spain 25.8 20.2 18.2 16.9 Sweden 9.2 10.3 9.8 10.9 UK 15.1 12.8 12.9 13.9 US 8.8 7.4 7.5 7.0
Old-age income poverty rates
GDP 대비공공복지 Total Social Spending, % of GDP (2007) Source: OECD, OECD, Social Expenditure Database. OECD
Changes in social expenditure
Social Policy developments 4+1 Social Insurances Work Injury Insurance Health Insurance National Pension + Basic old-age pension Employment Insurance Long-term care insurance Public Assistance + Activation policies Social services Childcare services Care for the elderly and the disabled
Structure of Korean Public Pensions Source from slide 8 to 13: Hosun Yoo (NPRC, 2013) 22
Brief History of the National Pension 1987 : legislation 1988 : enforcement of the scheme (workplaces with 10 workers or more) 1992 : expanded to the workplaces with 5 workers or more 1995 : expanded to rural areas 1999 : expanded to urban areas Pensionable age from 60 to 65 (2013-2033), Income Replacement rate from 70% to 60% (full coverage to labor force aged between 18 and 59 by law) 2007 : Introduction of non-contributory Basic Old Age Pension (tax-based and means tested, 70% of the elderly aged 65 and over, 5% of the 3-year average earnings of the insured of the NP) Earnings replacement rate : 60% 40% (2008~2028) 23
Vulnerable People in the National Pension - Coverage of Public Pension The insured of public pension Current contributors of public pension The insured of public pension Current contributors of public pension Working age 15-64 Labor force 15-64 57.0% 90.6% Working age 15-64 Labor force 15-64 40.4% 64.2% Working age 18-59 Labor force 18-59 64.7% 95.7% Working age 18-59 Labor force 18-59 45.8% 67.7% Sources: IMF OAP/FAD Conference (Seong Sook Kim, 2013) 24
Vulnerable People in the National Pension - Beneficiaries of Public Income Security for the Elderly (unit : thousand persons, %) Total Basic Old Age Recipients of population of Pension (BOAP) the National Pension (NP) and/or Non-beneficiaries aged 65 and over Recipients Public Occupational Pensions (POP) 5,701 (100%) 3,796 (66.6%) 1,799 (31.6%) only BOAP 2,889 (50.7%), NP+BOAP 907 (15.9%), only NP or POP 892 (15.7%) <Total = 4,688 (82.2%)> 1,013 (17.8%) Sources: IMF OAP/FAD Conference (Seong Sook Kim, 2013) ; Residents registration statistics, National statistical Office (Dec. 2011); National Pension and Basic Old Age Pension Data base (Dec. 2011); Government employees Pension Scheme (Dec. 2010); Private School Pension Scheme (June 2010); Military Personnel Pension Scheme (Dec. 2011). 25
Vulnerable People in the National Pension - Groups Exempted from Paying Causes of exemption from paying contributions (June. 2011) Total (%) Unemployed Suspension from office Cease of business Hospitalization over 3 months 100.0 75.7 1.4 7.8 0.1 National disaster Economic difficulties In jail Missing Schooling etc 0.0 5.1 0.1 1.7 8.0 26
Vulnerable People in the National Pension - Groups not Paying contributions Rates of contributions collections (Mar, 2010) (Unit: billion won, %) Total Workplaces The insured in regions Voluntary (+Continuously) Total Urban Rural 87.8 93.4 58.4 58.9 56.7 100.0 (%) 27
Why Employment Insurance? Protecting the unemployed End of full employment & life-long employment labour market Promote employability, reemployment, and job retention Active labour market policies Gender equality 28
Employment & unemployment rates (MOEL, 2012) 29
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History of Employment Insurance (Kil-sang Yoo, 2011) 31
Requirements and benefits (MOEL 2012) 32
Premium rates (MOEL 2012) 33
Trends in insured workers and actual coverage of EI (1996~2010) (Hwang 2011) 12,000 10,000 8,000 6,000 4,000 2,000 0 1,000 pers ons 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 80% 70% 60% 50% 40% 30% 20% 10% 0% Number of the ins ured Propotion of the insured 34
Actual coverage by groups (Hwang 2011) 35
Trends in the category of EI recipients and share to the total UB recipients (1997~2010) (Hwang 2011) Total Job-seeking benefit Early reemployment benefit Illness and injury benefit Others Number Percent Number Percent Number Percent Number Percent Number Percent 1997 44,591 100.0 1998 393,935 100.0 1999 459,518 100.0 2000 307,918 100.0 2001 383,830 100.0 2002 372,142 100.0 2003 450,483 100.0 2004 625,760 100.0 2005 712,446 100.0 2006 821,871 100.0 2007 861,056 100.0 2008 987,421 100.0 2009 1,306,152 100.0 2010 1,243,849 100.0 44,334 392,569 455,355 303,859 377,752 366,270 444,061 619,420 706,645 816,692 855,749 981,985 1,299,567 1,236,985 99.4 4,481 10.0 257 0.6 45 0.1 99.7 17,712 4.5 1,366 0.3 39 0.0 99.1 25,153 5.5 4,163 0.9 101 0.0 98.7 24,710 8.0 4,059 1.3 64 0.0 98.4 44,129 11.5 6,078 1.6 197 0.1 98.4 43,690 11.7 5,872 1.6 209 0.1 98.6 51,537 11.4 6,422 1.4 191 0.0 99.0 81,419 13.0 6,340 1.0 253 0.0 99.2 99,925 14.0 5,801 0.8 397 0.1 99.4 121,232 14.8 5,179 0.6 439 0.1 99.4 147,688 17.2 5,307 0.6 436 0.1 99.4 174,403 17.7 5,436 0.6 710 0.1 99.5 221,389 16.9 6,585 0.5 866 0.1 99.4 91,864 7.4 6,864 0.6 726 0.1 36
Trends in new benefit recipients and its proportion to total insured separators (Hwang 2011) 30% 25% 20% 15% 10% 5% 0% 1,000 persons 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Propotion of benefit recipients to separators New benefit recipients Separators 37
Distribution of reasons of not receiving UB by employment status (Unit: %) (Hwang 2011) Not receiving benefits Not insured No sufficient contribution Cause of separation Others Exhaustion of benefits Receiving benefits Total 45.0 11.1 22.9 6.8 2.9 11.3 Permanent 9.0 5.7 34.2 7.6 6.6 37.0 Temporary 46.9 11.6 25.1 6.5 2.7 7.2 Daily 61.6 13.5 14.9 6.6 1.1 2.3 38
Issues and challenges: pensions Strengthening old-age security against high old-age poverty: Expanding tax-based Basic Pension but how? Providing pension contribution subsidies for low-income workers Improving the level of pension benefits? Improving the sustainability: Increasing contribution rates whereas decreasing the benefit level? Higher fertility and higher employment rates Stronger economic performances New multi-pillar (tier) system? 39
Issues and challenges: EI Enhancing the effectiveness of EI: Expanding the coverage: contribution subsidies for low-income workers, longer duration of benefits? Activation policies for low-income workers: Employment Success Package plus unemployment assistance for low (un) skilled workers Strengthening active labor market policies Effects of unemployment benefits: Inconsistent results so far 40