▲ Union members in the U.K. marching through the streets of London arguing for the protection of the Welfare State and Public Services Photo: www.demotix.com London, UK, April, 2010
Korean Welfare State since the Asian Financial Crisis in 1997
Korea's welfare system has developed in earnest since the 1980s. In the late 1980s and the early 1990s successful democratization, powerful citizens’ and labor movements have contributed to the development of welfare policy and importance of individuals’ social and human rights. When the first democratically elected government came into power in 1988, it offered the National Health Insurance benefits to the entire population. Also, the national pension system became compulsory in 1988, covering workplaces with 10 or more employees. The coverage was extended to workplaces with 5 or more employees by 1992 and subsequently to all full-time employees. The Unemployment Insurance System was adopted in 1995.
Since the 1990s, the Korean welfare system has undergone significant changes. On the one hand, as Korea achieved economic success, people started to pay more attention to their quality of life, but on the other hand, an economic crisis occurred in the late 1990s. In the wake of the Asian financial crisis in 1997 Korea was forced to restructure and strengthen its existing social welfare programs. High unemployment was unfamiliar to most Korean people and sudden economic crisis and its unprecedented consequences changed people’s existence and Korean society greatly. This in turn changed the welfare structure, together with expansion in welfare expenditure. State responsibility for welfare support has been widely emphasized. Social insurance policy has been strengthened and the public assistance program, the "National Basic Livelihood Security Program", was extended in 1999.
Besides old social risks, new social risks such as family disintegration, falling fertility rate, graying population have arisen rapidly. Old social risks and new social risks together have been escalating into severe social crises. This is why we need active social policies and responsible state intervention. In fact, Korean government has responded to these issues. The government has introduced long-term health care for the elderly and various policies to promote childbirth, such as offering financial incentives and extending childcare facilities. However, a shortage in childcare facilities that parents can trust still inhibits married couples from having children. Experts argue that the policy of socialization of caring has not successfully responded the caring need, although huge amount of budget has been administered for over 10 years.
Political Competition and Universal Welfare Disputes since 2010
Many people think that the crisis of Korean society is serious and they look the welfare state and the expanding of welfare as an alternative. Since 2010 the Nordic welfare model has emerged as the more concrete alternative. Universal welfare state became a key issue in institutionalized political arena in Korea since 2010. The progressive opposition party triggered a race for free welfare by pledging to offer free meals for all elementary and middle school students ahead of the 2010 local elections. Then, free welfare pledges including free childcare were promised by every political party for the general and presidential elections in 2012. The conservative ruling party also promised universal welfare programs and economic democracy. Welfare expenditure has increased significantly. However, social inequality is widening, low fertility rate is persisting and poverty rate is still increasing. Every generation is suffering from social insecurities. Can Korea make a genuine welfare state like Sweden or Denmark which reduces and minimizes social insecurities?
Nordic Welfare Model and Its Implications for Korea
Korea's welfare spending is still not enough by international standards. Then, if we increase tax and spend more on welfare programs, can we make a genuine welfare state like Sweden or Norway? There are a lot of prejudices and misunderstandings surrounding the Nordic welfare state. Nordic social care is not all free. Unconditional expansion of free welfare cannot be the effective solution. The Nordic model is described as a system of competitive capitalism with low levels of inequality, generous welfare states, reduced concentration of top incomes and high employment rate. The Nordic welfare model also ties into their labor market policies. This means that the Nordic welfare model is primarily based on flexible and secured labor market and effective and efficient welfare programs. The Nordic countries share active labor market policies which are designed to provide generous social welfare, job retraining and relocation. This can develop economically-sustainable and socially equitable welfare state system. This is why the Nordic countries are appraised as successful society and probably the best-governed in the world.
What lessons from the Nordic Welfare States?
Despite welfare retrenchment since the 1990s, the Nordic countries continue to prosper and regularly come out on top of the global indexes of happiness and quality of life. The Nordic welfare states are still the envy of many across the world mainly due to their universal welfare programs and regulated, egalitarian labor markets.
Then, what lessons can we learn from the Nordic experience? Firstly, to get the Nordic model of redistribution and social protection is basically to build social power. This means social capital and good governance including labor movement capable of advancing the agenda. For the welfare of society and social care, social solidarity and consensus such as a broad commitment to social cohesion and maximizing public participation in social decision-making will be necessary.
Secondly, labor market policy and welfare program must be closely connected. First of all, labor market should be flexible and egalitarian. Employment and adequate wage income is the best welfare and this is why Nordic countries always emphasize activation policies connecting people with jobs. Also, we need to reform and restructure welfare system as several welfare programs are overlapped and ineffective.
Thirdly, Nordic states are the most decentralized among advanced industrial countries though Nordic states vary in welfare decentralization to local governments. However, welfare decentralization itself cannot be the goal, but it is for efficient and egalitarian welfare services. Supralocal supervision and coordinated joint efforts by the central and local governments are called for to restructure and advance welfare programs in Korea.
Finally, welfare state is very political as well as ideological issue. But too much politicized welfare discourse will be not helpful. ‘cool heads but warm hearts’ approach could reconcile economic policy with the public need in welfare. To solve new social risks as well as the traditional income security policies will be effective economic policy since Korean socioeconomic conditions require significant redistribution and social care policies.
By Kim In-choon, Research Professor, Institute of East and West Studies, Yonsei University