Social assistance reform in post-economic crisis Korea: The policy-making process of the National Basic Livelihood Security Act

1
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_at_york.ac.uk

2
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

3
The Structure of this presentation

• Introduction
• Economic crisis social assistance reform in
  Korea
• Changing the structures of social assistance
• The policy-making process
• Conclusions

4
Introduction

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

5
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.

6
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.

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Trends in unemployment and poverty in Korea
Source NSO (2001b) Park (2000)
8
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
9
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
10
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
• gt A threat to socio-political instability

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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

13
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

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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

15
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

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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)

17
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
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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).

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

20
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
• gt One social issue rapidly emerged that
  resources should be distributed first to people
  with low-income
• gt People who live in poverty should be
  entitled to a Basic Livelihood Security System
  provided by the state

21
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
• gt 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)

22
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

23
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

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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)

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Forming a new coalition
26
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

27
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)

28
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

29
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
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The coalitions 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)

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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

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Coinciding with the coalitions efforts

• President Kim Dae-Jungs 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
• gt The bill finally passed the NA on 12 August
  1999

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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.

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

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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