Pending Issues of Public Assistance System and Estimation of Public Finance Requirement
Published on November 21, 2019
Published by Social Cost Estimates Division, Estimates and Tax Analysis Department
Public assistance is a representative socioeconomic system in which state agencies including the government or local governments support people experiencing difficulties in livelihood with tax as the source of finance in order to guarantee the minimum level of a healthy and cultural life. In Korea, since the Livelihood Protection System was introduced in 1961, public assistance has served as a major pillar of the social security system after going through diverse changes and the introduction of new institutions. Meanwhile, while Korea has seen significant improvement in income levels along with rapid economic growth, the number of those in relative poverty has increased due to bifurcation caused by an expanding gap between the rich and the poor. Since public assistance is based on the government directly supporting the socially disadvantaged including the poor so that they can maintain the basic level of life as human beings, there is increasing social interest in and calls for the expansion of public assistance programs. The government is also making diverse efforts so that low-income and poor people can maintain a stable livelihood through the improvement of related institutions, etc., and fiscal spending is expected to increase if the government expands the targets and size of its support of public assistance programs going forward. Hence, this report presents the recent pending policy issues and the estimation of the public finance requirements expected if the policy for each of these issues is reflected.
First, as basic pension is included as income in the calculation standards of the current livelihood allowance, the livelihood allowance is provided with the basic pension amount subtracted. With regard to this issue, if it is assumed that the subtracted amount is 100,000 won less than the basic pension amount or if there is no subtraction of the basic pension amount at all from the livelihood allowance, an annual average of 6.5 trillion won and 7.4 trillion won, respectively, were estimated as the public finance requirement over the next 10 years.
Second, the government is gradually relieving the requirement to have no "person under obligation to support", which is a major requirement of the National Basic Livelihood Security Act, to resolve issues regarding welfare blind spots. Hence, this estimation was conducted under the assumption that the requirement is fully abolished, and the results showed an annual average of 10.5 trillion won as the public finance requirement for the livelihood allowance and 17.7 trillion won for the healthcare allowance.
Third, as the government has recently planned an increase of the basic pension and the disability pension, a public finance requirement estimation on these pensions was conducted, and the results were annual average of 22.9 trillion won for the basic pension and 1.23 trillion won for the disability pension.
Lastly, there are continuous discussions on the inconsistency in defining severely disabled persons with regard to the disability pension and on the plan of expanding the recipients of the disability pension to severely disabled persons overall. Therefore, if it is assumed that the recipients of the disability pension will be expanded while the payment amount to new recipients will be reduced, the public finance requirement of an annual average of 1.56 trillion won over the next 10 years was estimated. If it is assumed that the payment amount to new recipients will not be reduced, the public finance requirement of an annual average of 1.92 trillion won over the next 10 years was estimated.