Overcoming Poverty in Korea -Experiences of Roh Moo-hyun Government 2003-2007- 4 November 2008 EASP 5 th Conference, Taipei Yong-Ik Kim Department of Health Policy and Management College of Medicine, Seoul National University Former Senior Secretary of Social Policy to the President of Korea 1
Contents Facts and Figures Causes and Mechanism Concepts and Strategies for Poverty Reduction Policies 2003-2007 Achievements and Limits Future 2
Facts and Figures 3
Brief Introduction to Korea 2007 Population: 48.5 million GDP: US$ 969.9 billion the 10 th largest economy Per capita GNI: US$ 20,045 Trade Exports: US$ 371.5 billion Imports: US$ 356.8 billion The 29 th member of OECD in 1996 (now 30 member countries) 4
Income inequality Income inequality (urban working households) 0.283 0.304 0.298 0.304 0.303 Gini coefficient 4.34 4.88 4.65 5.09 5.03 Ratio of Income(5th quintile /1st quintile) 96 99 02 04 06 0.4 0.3 0.2 Gini Coefficient in OECD countries Korea: 06, Others : 02 0.242 0.272 0.295 0.295 0.305 0.31 0.319 0.325 0.33 0.345 0.346 0.1 0 SWE GER AUS OECD CAN JPN GBK KOR NZL ITA USA Korea: the 12 th of 16 countries data available in OECD (Source: PCSI, 2007) 5
Poverty rate Po v e r t y R a t e Changes of poverty rate (based on urban workers household) Relative poverty rate 15 10.8 10.7 9.2 8.7 9.9 9.6 9.6 10.3 11.6 10 7.4 8 6.4 Absolute poverty relative rate poverty 5 4.3 3.9 5.2 4.1 5.4 5.2 absolute poverty 0 '96 '97 '98 '99 '00 '01 '02 '03 '04 Relative Poverty in OECD countries Relative poverty: based on 50% of median income Absolute poverty: based on minimum standard of living 16.7% 16.9% 15.3% Korea: 06, Others : 02 10.7% 10.8% 4.6% Korea: the 20 th of 28 countries data available in OECD Korea US Japan UK Germany Sweden (Source: PCSI, 2007) 6
Dynamics of the poor 65%, Persistent non-poor (never experienced poverty) 35% of Korean population is poor or vulnerable to poverty 15%, Transient Poor (experienced poverty once/18months) 16%, Recurrent Poor (experienced poverty twice +/18months) 4%, Persistent Poor (remaining poor over last 21months) (Source: KIHASA, 2006) 7
Who are the poor? Severely disabled 3% Children 21% Aged 30% Workable 46% 26.3% working 7.6% unemployed 6.1% economically inactive (Source: Kim et al, 2006) 8
Causes and Mechanism 9
Job Creation and Trickle Down Effect Industry creates less jobs Jobs created by 1% GDP growth 12.0 (10,000 jobs) 11.2 10.0 8.0 10.5 9.8 90 95 00 Elasticity of employment (persons/trillion won) 40 27.7 28.1 21.8 20 15.9 15.4 9.7 0 90 95 00 Manufactures Services (Source: Vision2030, 2006) Wealth does not trickle down to the poor (trillion won, constant price) 800 600 400 200 85 90 95 00 Economic crisis (1998) GDP Income shared by the lowest 20% Weakening of Trickle Down Effect 9.0% 8.0% 7.0% 6.0% 10
Causing mechanism of poverty Large vs Medium/Small Export vs Domestic Income gap Assets Globalization Industry Labor market Income Housing/Estate 주택 / 토지 Regular vs non-regular jobs Self-employed/unemployed Diplomaism Knowledge Health Physical fitness Intellectual competence Hereditary transmission of poverty 11
Economic bipolarization Labor market fragmentation Education gap Gaps between Export & Domestic, Large & Small, Manufacture & Service Industries Sales Ordinary profit Value added (%) (%) (%) 20 manufacture service 19.80 19.85 15 14.76 12.32 12.75 13.02 9.44 10 6.48 5 0 export domestic big small export domestic big small 00 01 02 03 04 05 (Source: PCJS, 2006) 12
Economic bipolarization Labor market fragmentation Education gap Vertical immobility in labor market à trap of non-regular jobs and low wage Economically non-active population non-regularàregular transfer Escape from low-wage Women, 50+ aged and disabled (%) 40 (%) 40 (%) 40 33.7 30 30 30 20 20 10 13.8 20 16.2 10 0 DEN GER FRA KOR 10 DEN GER FRA KOR 0 KOR JPN GER USA DEN 13
Changes of non-regular workers Changes of low-wage workers (10,000 persons) 700 numbers rate (%) 40 (%) 30 20 600 500 35 30 25 20 10 0 01 02 03 04 Wage level gap 05 400 15 (%) 40 Small to large business Non-regular to regular 300 10 5 30 20 200 01 02 03 04 05 06 0 10 0 01 02 03 04 05 14
Economic bipolarization Labor market fragmentation Education gap Education gap à Employment, adaptation gap Non-regular workers by education Monthly salary by education (%) (1,000 Won) College graduates 25.7 College or more educated 2,208 High school graduates 36.5 High school graduates 1,456 Middle school graduate 55.5 Middle school or less 1,226 0 20 40 60 0 500 1,000 1,500 2,000 2,500 (Source: National Statistical Office) 15
Concepts and Strategies for Poverty Reduction 16
Strategies to battle against Poverty I ndustry Job creation Distribution of market income Economic Policy Education Child Care Income Support Social Service Employment Work Ability Employment Training Inability Child Child Child Low Work Ability Income Support Social Policy Education Labour Welfare Health Child care Housing Environment Culture and Sports Security Crime, Gambling, Substance Abuse, Disease, Accident, etc 17
Coordination of Economic and Social Policy Economic policy Social policy Sustainable growth Social integration as social policy Job creation Market income distribution Policy Synergy as economic policy Human/Social capital Purchasing Power 18
Social Investment Enabling the people, not maintenance; Focus on ensuring equal opportunity for all Investing more in human and social capital than physical capital for knowledge-based economy Investing in children as future citizens An approach incorporating social and economic policy; Social (welfare) spending can facilitate (not deter) economic growth by promoting social and economic participation and integration through investment into human and social capital in MOHW(2007), Social Investment and Health and Welfare Policies 19
Policies 2003-2007 20
Social safety net 1 social safety net 2 social safety net National Pension application to all( 99) NHI application upto 365 days ( 00) Unemployment Insurance application to whole workplaces( 98) IACI application to whole workplaces ( 00) National Basic Livelihood Security System launched( 00) Medical care for near-poor( 05) Social Welfare Service for vulnerable class Basic system is constructed, but the dead zone is widely left over à Incomplete prevention from poverty households(%) persons(%) 100-120% of minimum cost of living 760,000 (5.0%) 2,060,000(4.3%) Under minimum cost of living Recipients 720,000(4.7%) 1,380,000(2.9%) Non-recipients 1,035,000(8.8%) 3,730,000(7.8%) 21
Expansion of social safety net(1) Expanding Basic Security recipients Continuous expanding recipients of the National Basic Livelihood Protection Program Granting the right to receive Medicaid insurance to the near-poor (10,000 Basic Security Recipients persons) general facilities 145 145 145 8.8 8.6 142 8.5 8.6 135 8.2 7.6 134 129 125 128 02 03 04 05 06 07 (10,000 persons) 9 8 7 Expansion of Housing Welfare Promoting construction of 1,000,000 national rental housing units ( 03~ 12) Supplying Customized Rental Housing( 04~) Supporting National Housing Fund for low-income people (10,000 persons) 200 150 100 50 Medical Benefits Recipients 184 150 152 116 Emergent Assistance System ( 06) Quick Supporting to the Crisis Situation 0 '97 '01 '04 '07 (Source: Ministry of Health and Welfare, 2007) 22
Expansion of social safety net(2) Preventing from poverty caused by disease Expansion of NHI coverage for severe diseases ( 04~) Executing cost sharing limiting system ( 04) (%) 80 60 NHI Coverage for Cancer 49.6 66.1 71 71.5 Synthetic measures for poor children juveniles Child development account Local child center Targets for Childcare Hope Start Project 1.18M 0.24M persons 40 '04 '05 '06 '07 Budget for Childcare 1.3B Won 0.24B Won 02 07 02 07 (Source: Ministry of Gender Equality and Family Affair, 2007) Preventing from poverty caused by aging Basic old-age pension( 08): 60% of over 65 (3.0m persons) Long-term care insurance for the aged( 08): 3.1% of over 65 (0.17m persons) 23
Resolving educational gaps for reinforcing stratum mobility School Expense Lending Expansion school expenses lending by government s guarantee( 05) (trillion won) loan beneficiaries (10,000 persons) Induction of chance-balanced selection system( 07) Being in operation in 09: 9% over-regular( 08~ 10), 11%(after 11) expansion of special selection for rural communities( 05), for specific high schools ( 06) Provision scholarship for Basic Livelihood Security Recipients Educational welfare investment for resolving regional gaps 15( 05) 30( 06) 60( 07) 400 200 After-Class School students budget 2,168 292 283 296 323 385 2500 2000 1500 1000 Induction of after-class school( 05) 0 (10,000 persons) 5 23 39 337 500 0 (0.1M Won) 03 04 05 06 07 (Source: Ministry of Education, 2007) 24
Solution for employment and wage bipolarization Job creation for social service Act on Social Enterprise Promotion( 07) Building job safety net Strengthening job support center Supporting lifelong vocational competency development 20 15 10 5 (10,000 persons) Job for Social Service persons budget 03 04 05 06 07 Job Center Users 247.2 120 100 80 60 40 20 (10B Won) Resolving discrimination in labor market and protecting hard-to-employ populations Act on the Protection of Part-time Employees( 07) 15 126.4 Wider application and raising of the minimum wage minimum wage(won/hour) : 2,275( 02) 3,770( 07) Wider coverage of UI and IACI, and unemployment benefits Workplaces under UI: 0.47M( 97) 1.29M( 07) Workplaces under IACI: 0.22M( 97) 1.42M( 07) Unemployment Benefits ratio: : 1.8%( 97) 34.8% ( 07) (10,000 persons) 97 '02 '07 Conversion to Unlimited Contract Workers 27,000 persons (109 places) private 67,000persons (9,139places) public at the end of 2007 (Source: Ministry of Labor, 2007) 25
사회투자의 Increment of public 확대 social (1) : expenditure OECD 기준 5.5%( 98) à 5.7%( 03) à 7.3%( 05 ) (Trillion won) 80 Public Social Expenditure 7.3% (%) 8 70 60 expenditure To GDP 5.5% 5.4% 5.4% 5.7% 58.9B 6 50 40 30 26.4B 33.8B 36.8B 42.3B 4 20 2 10 98 01 02 03 05 0 26
Changes of budget allocation to social sector (%) 28 25.5 27.5 28.7 27.9 Social 19.9 22.2 23 18 17.7 17.1 18.3 18.2 15.0 18.4 20.2 Economic 15.0 14.5 13 14.3 11.2 11.4 Education 11.5 Defense 8 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Roh, TW Kim, YS Kim, DJ Roh, MH 27
Achievements and Limits 28
Changes of Poverty Rates Relative poverty rate Absolute poverty rate (Source: National Statistical Office, 2007) 29
소득분배 Improvement 개선효과 effect in ratio (2) of income : 5분위배율 is consistently 개선 progressed è Ratio of income based on disposable income is also held back Ratio of Income Reduction(%) Market income Disposable income 6.96 7.51 Whole households Whole households 4.86 5.11 5.03 Urban workers households Urban workers households (Source: National Statistical Office, 2007) Ratio s Gap between market income and disposable income is caused by the political effect such as public income transfer, direct tax, and social security 30
소득분배 Improvement 개선효과 effect of Gini coefficient (1) : 지니계수개선 between market and disposable income, consistently improving Gini Coefficient Improvement(%) Market income Disposable income 0.341 Whole households 0.336 Whole households 0.298 0.304 0.303 Urban workers households Urban workers households (Source: National Statistical Office, 2007) Gini s Gap between market income and disposable income is caused by the political effect such as public income transfer, direct tax, and social security 31
International comparison of income re-distribution (%) 40 35 30 Gini coefficient change between market and disposable incomes 35.6 30.9 26.1 26.2 25 20 15 17.6 14.3 10 5 3.6 5.5 0 SWE(2nd) GER GBR USA JPN OECD KOR('03) KOR('06) (16th) (OECD, 2000; Korea, 2003, 2006) 32
National burden and service benefits by the brackets of income (Unit: KW 1,000) 1600 National burden National service benefit 1569 1400 1200 1000 800 600 400 200 116 415 203 493 516 284 574 599 605 570 461 374 667648 812 993 707 723 843 0 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th (Source: KIPF, 2008) 33
Inequality effects by redistribution methods Gini's coeff. 0.360 0.350 0.340 0.330 0.320 0.310 0.300 0.290 0.280 0.270 0.329 Private transfer 4.06% improved Public transfer(cash) 2.67% improved 0.316 0.308 Direct tax 3.38% improved Social security contribution 4.06% improved Consumption tax 0.38% worsened 0.297 0.295 0.296 Public transfer(spot) 7.03% improved Market Private Total Disposable 1 Disposable 2 After tax Final 0.273 (Source: KIPF, 2008) Private income transfer is of importance in Korea Public income transfer will redistribute more as Nation Pension pays widely to the eligible from 2008, plus elderly allowance. 34
Future 35
Global economic crisis Korea s new conservative government Rapid ageing of Korean population 36
Korea s market open to global economy Trade(2007) Energy (2006) 70 60 50 40 30 20 10 0 38.3 36.8 37.6 29.5 16.0 14.2 64.4 57.2 21.4 24.1 14.6 8.4 Export import 37.2 33.3 22.4 15.7 KOR CHN JPN TWN USA FRA SWE GBR Domestic 8,192(3.5%) Import 225,180(96.5%) Shareholding by Foreign Investors Dependence of energy on overseas FTA 350 300 250 200 150 100 50 0 45 37.17 40 40.1 35.16 35 30.94 30 25 270 273 325 20 15 178 10 5 0 2004 (Source: National Statistical Office, Trillion 2005 2006 2007 2007) Won Per.(%) 37 13 5 21 1 3 20 U.S.A. China E.U. Mexico Chile 3 Korea Chile( 02) Singapore( 04) ASEAN( 06) US( 07) EU(on going)
Priority change by the new government (National Next Five Years Budget Plan) Social Overhead Capital (SOC) Health & Welfare, Education, Environment Increase rate(%) 10 9.7 8.7 8.6 8 7.3 7.6 6 4.9 4 3.7 1.9 2 0 SOC Health & Welfare Education Environment Prior Government('07~'11) Present Gorvernment('08~'12) 38
Rapid aging of population elderly poor 2008 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 0 14 15 64 65 Total population 48.1m( 07) 49.3m( 18) 48.6( 30) 42.3m( 50) Elderly population 4.4m(9.1%, 07) 7.1m(19.6%, 18) 16.2m(38.2%, 50) Productive population 34.5m( 07) 34.0( 18) 31.2( 30) 22.4m( 50) 39
Thank you 40