Park_Revisiting the Welfare System in the Rep. of Korea_2008

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Revisiting the welfare statesystem in the Republic of Korea

Yong Soo Park

Korea Maritime University, Busan, Republic of Korea

Abstract The Republic of Koreas welfare system has under-gone radical institutional expansion since the 1990s, largely as aconsequence of the nancial crisis of 1997. In spite of thesechanges, public social expenditure remains extremely low particularly with regard to all other OECD countries with

the result that the overall social insurance system and socialwelfare service sector remain underdeveloped. Thus, thecurrent welfare system can best be characterized as a residualmodel, in that state intervention as a provider of welfareremains highly limited and the family and the private marketeconomy play the central roles in offering a social safety net.This situation is largely the legacy of the so-called growth-rstideology, which has remained the dominant approach favouredby the majority of the countrys political and economic

decision-makers since the period of authoritarian rule (1961-1993). The adoption of Western European-style neo-liberalrestructuring, implemented following the 1997 nancial crisis,has also played a role.

Keywords welfare state, public expenditure, political aspect,evaluation, Republic of Korea, OECD

Introduction

Many commentators have described the characteristics of the welfare system of the Republic of Korea (hereafter, Korea), 1 but they have rarely considered the

Address for correspondence: Dr. Y. S. Park, The College of International Studies, Korea MaritimeUniversity, #1, Dongsam-dong, Youngdo-gu,Busan, 606-791 Republic of Korea. Email: [email protected]. See Kwon H.-J. (1997; 2002); Hong, K. J. (1999); Tang (2000); Cho (2002a; 2002b; 2002c); Hong, T. H.(2002); Jung (2002); Kim,Y. B. (2002); Kim,Y. M. (ed.) (2002); Nam (2002); Sung (2002); Hong andSong(2003); Yang (2003; 2005); Bidet (2004); Kim, Y. M. (2004); Kuhnle (2004); Sonn (2005); and Shin

(2006).

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historical/structural or political/economic processes that helped to shape its uniquecharacteristics. The majority of studies that have been conducted in Korea rely heavily on Esping-Andersens (1990; 1999) typology, which was formulated and

based on the advanced welfare states of the West, and focus primarily on investi-gating apparent analogies between the welfare systems of Korea and those inEurope. As such, it is perhaps inevitable that a number of important issues forinstance, how individuals function within the state-market relationship as a result of welfare policy implementation, and the kinds of political and economic factors thatmight be associated with the emergence and development of a particular type of welfare system in Korea have rarely been considered by social theorists. Thisarticle aims to redress these problems by examining the Korean welfare system fromthe perspective of the typology developed by Wilensky and Lebeaux (1958) that uses

a broader framework to determine the nature of welfare regimes, rather than theEsping-Andersen model. It also seeks to explain from a historical perspective thepolitical and economic background against which a particular type of welfaresystem has developed in Korea.

The second section of this article examines which model the social welfaresystem in Korea more closely resembles i.e. the residual model or the institutionalone. The third section investigates political and economic factors that have playedpivotal roles in the development of the type of welfare system found in Korea, whilethe fourth section draws together the principal nding and offers conclusions.

Typology of the welfare state in Korea

Wilensky and Lebeaux (1958) rst introduced the terms residual and institu-tional. In the residual model, the role of the state is highly restricted while theindividual, the family, the voluntary sector, and the private market economy becomethe optimal means of meeting needs and redistributing resources. Public services, assuch, are provided only as a last resort after clear evidence that all other avenues of support have been exhausted. The assistance offered is usually restricted to a limitedamount of nancial support, and is regularly means tested. Even in these limited

cases, the primary goal of state intervention is to maximize individual autonomy,usually through paid work. In the institutional framework, however, the stateassumes a larger role, while at the same time offering a broader range of services thatare not restricted to a small proportion of the population (i.e. the poor or disad-vantaged), nor are they regularly means tested.

How the welfare system in Korea should be characterized is a difcult issue. Areason for this is the common absence of a comprehensive and concrete measure-ment technique or tool to analyze all aspects of the performance of a countryssocial welfare system, and also because varying outcomes may be produced if the

system is evaluated on the basis of specic aspects alone (Hong and Song, 2003,

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p. 206; Kim, Y. M., 2004, p. 135). With this in mind, the present section attempts toconsider the characteristics of the welfare system in Korea by focusing on the overallchanges in national social insurance, public assistance, and social welfare services

since the 1990s.As many statistics indicate, public spending on social welfare in Korea has

increased rapidly since the 1990s (Hong and Song, 2003, p. 209, p. 226; Ko et al.,1999). This was especially evident during the administration of Kim Dae-Jung, whotook ofce immediately after the 1997 nancial crisis and advocated productivewelfare as one of his policy goals. A sweeping reform of the national social welfaresystem subsequently followed. A radical increase in public social expenditure andexpanded coverage of national social insurance programmes (national pension,employment insurance, national health insurance and industrial accident compen-

sation insurance) occurred. At the same time, an attempt was made to build auniversal social security system by reforming public assistance policy. Kim Dae-Jungs government also established the Korea Tripartite Commission in 1998, aspart of its efforts to institutionalize cooperation between labour, management andbureaucracy. This was the rst time since the liberation of Korea in 1945 that aKorean government had ofcially chosen the expansion of the national socialwelfare system as its core policy goal, and subsequently implemented it (Hong andSong, 2003, p. 208).

Some commentators have evaluated the welfare reform initiated by the KimDae-Jung administration as a very positive move, likening it to reforms imple-mented in the United States during the Great Depression of the 1930s and in theUnited Kingdom at the end of the Second World War (Sung, 2002, p. 510). Othershave labelled it the welfare windstorm (Kim and Sung, 2003, p. 412).

A clearer picture of the Kim administrations welfare policies can be establishedby examining some of the major areas of the reform. First, the administrationaddressed the issue of social insurance, expanding the coverage provided underemployment insurance and industrial accident compensation insurance to all com-panies with fewer than ve employees. Second, the national pension scheme wasrevised to cover all citizens between ages 18 and 59 as of 1999.2 Third, it sought to

reduce household expenditure on health care while at the same time attemptingto elevate the health status of Koreans through the establishment of the NationalHealth Insurance Corporation (NHIC) in 1997.

The NHIC was established through the National Health Insurance Act, whichintegrated 227 health insurance societies covering self-employed persons with thehealth insurance corporations of public servants and private school employees. By

2. The National Pension Scheme for all Korean citizens was provided for by the National Pension Act of 1986, which was implemented in 1988. By 1999, coverage had been extended nationally (MOHW. 2005,

pp. 288-9).

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July 2000, all health insurance management systems had been fully integrated. TheHealth Insurance Review Agency was set up that same month, and was given theresponsibility of reviewing medical fees and evaluating health care performance.

With its authority established, the agency then implemented a national policy toinstitute guidelines for the prescribing and dispensing of medication separately.Through these measures, it can be said that Korea had nally begun the implemen-tation of a universal social insurance system to cover all of its citizens (Nam, 2002,pp. 152-3).

Turning its attention to public assistance policy, the Kim Dae-Jung governmentenacted the National Basic Livelihood Security Act in September 1999, and fully implemented the National Basic Livelihood Security System (NBLSS) in October2000. The new system marked a signicant change in governmental policy, for

unlike the previous system prior to October 2000, the NBLSS provided all peopleliving below the poverty line with nancial benets regardless of whether they werecapable of work. With such a radical policy change, the number of persons eligiblefor assistance under the new system rapidly increased (MOHW, 2005, p. 67).

The Kim Dae-Jung government also addressed labour issues, establishing theKorea Tripartite Commission and legitimatizing the Korean Confederation of TradeUnions (KCTU). This was an attempt to enhance labour-management cooperationand to resolve labour issues on the basis of agreement between labour, managementand the government by forming a centralized, corporatist-style consultation system.

All of the governmental measures taken since the 1990s suggest that Koreanadministrations have been seriously committed to the institutional expansion of social welfare. As one of its 12 policy goals, the incoming administration of Roh Moo-Hyun, who took ofce in early 2003, declared its intention to improveparticipatory welfare and the quality of life, and consequently increased socialexpenditure on a large scale. Table 1 shows that, between 2002 and 2006, the shareof public social expenditure in Koreas total government budget increased from 19.9per cent to 27.9 per cent.

Despite these large-scale efforts, Koreas welfare system still lags signicantly

behind the advanced social welfare programmes of countries with similar-sized

Table 1. Trends in Koreas public social expenditure as a percentage of the total government budget, 2002-2006

2002 2003 2004 2005 2006

19.9 20.2 24.5 26.7 27.9

Source: Ofce of the President, Republic of Korea, 2007.

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economies. The percentages of wage-earning Korean employees covered by socialinsurance in 2001, for example,were at very low levels: 51.8 per cent for the nationalpension, 54.3 per cent for national health insurance, and 46.9 per cent for employ-

ment insurance (Lee, H.-G., 2001, p. 6). Also in 2001, the percentage of so-callednon-standard workers covered by social insurance stood at less than 25 per cent(ibid). This illustrates that, notwithstanding the aforementioned policy changes, themajority of low-income earners, including standard workers employed in smallcompanies with fewer than ve employees and all non-standard workers, lack anadequate social safety net. In addition, successive Korean governments spending onnational social insurance has been extremely conservative. Social insurance isfunded primarily by contributions from employers and employees, rather than tax,which suggests that no effective method of income redistribution in the system

exists (Yang, 2003, pp. 421-2;Yang, 2005, p.396). The future of the national pension,in particular, has caused considerable concern. Many studies have predicted thatits fund may be exhausted by 2040 or thereabouts largely as a consequence of excessively low social insurance coverage rates relative to the increased number of pension recipients (owing to the rapid aging of the Korean population), as well asthe lack of an adequate administrative infrastructure to assess the income of self-employed persons (Hong, T. H., 2002, pp. 354-5).

With regard to labour policy, it has been argued as predicted by many at thetime of its establishment that the Korea Tripartite Commission has not been ableto perform its role sufciently due to the lack of institutional infrastructure neededto shore up the agencys activities (Kim, S. Y., 2005, p. 263). Moreover, as a directresult of the neo-liberal labour policy (which emphasizes wage and labour exibil-ity) that has been advanced since the nancial crisis of 1997, the total number of low-wage non-standard workers has grown signicantly. The percentage of non-standard workers in Koreas total workforce increased from 45 per cent immediately following the nancial crisis to 55.4 per cent (7.84 million persons) in 2003, 55.9 percent (8.16 million persons) in 2004, and 56.1 per cent (8.4 million persons) in 2005(Choi, T. W., 2006). Presently, Korea ranks rst among 30 OECD countries in termsof its percentage of non-standard workers in the total workforce (ibid). The fact that

non-standard workers now account for the majority of the total labour force inKorea largely explains why national social insurance only covers approximately 50 per cent of wage earners, in spite of coverage having been rapidly expanded sincethe nancial crisis.

The integrated national health insurance programme, and the revised policy forthe separate prescribing and dispensing of medication, were implemented undervery difcult circumstances that saw strong opposition from interest groups con-cerned about the possible negative social repercussions. The fears of many nowseem to have been realized, as evidenced by an inated budget decit in the national

health insurance programme and an increased nancial burden on the general

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population due to sharp increases in health insurance fees (Hong, T. H., 2002,p.354). At present, health care charges paid by patients account for more than 50 percent of total heath care costs, which signies that the nancial burden placed on

individuals and families with regard to health care expenses is still very signicant(Yang, 2005, p. 396). In addition, the private medical sectors stake in Koreasnational health care is extremely large while the share of the public sector isextremely small; hence, it can be argued that the need for adequate health care forunemployed people or those with low incomes has not yet been met. Cur-rently, the percentage share of public health services in Korean national health careis approximately 20 per cent, rendering it the lowest in this category among 30OECD countries (MOHW, 2005, pp. 375-6).

The National Basic Livelihood Security System (NBLSS), established in 2000,

aims to provide assistance for those in need. Unlike the previous system, the NBLSSprovides nancial aid to all people living below the poverty line, regardless of theircapacity to work. However, in order to qualify as an NBLSS recipient, individualsmust provide evidence that they are unable to support themselves and lack sustain-able support from any other party. The total value of the potential recipientsincome and property is assessed, and if this is below a predetermined income levelspecied by the Ministry of Health and Welfare, nancial benets are provided(MOHW, 2005, p. 69). Given the strict conditions for eligibility, it is not surprisingthat only 27.1 per cent of low-income households benet from the system (Lee andChoi, 2004). Presently, approximately 8 million people in Korea live below thepoverty line; however, only 1.4 million of these are protected by the NBLSS (Ryu,2005, p. 172). The remaining 6.6 million people remain without the protection of a public assistance programme (ibid, p. 172). Furthermore, in order to embody the concept of productive welfare, the Korean government has introduced a self-assistance policy under which social benets are provided on the condition thatNBLSS recipients participate in self-support programmes (MOHW, 2005, p. 69).The ultimate aim of this particular measure is to prevent the recipients of nancialaid from becoming overly complacent with regard to receiving state assistance. Thisapproach, which tends to emphasize and force individual autonomy and self-

support, is a feature typical of the residual welfare model.In the past, the family occupied the most important position in Koreas social

welfare system. Despite the expansion in coverage of national social insurancefollowing the nancial crisis, the value of private income transfers within the family still surpasses that of public income transfers. In 2000, private income transferstotalled 18.3 trillion won (3.5 per cent of GDP), surpassing total income-security related expenses, including national pension, survivor pension, unemploymentbenet, NBLSS, etc., which totalled 11.8 trillion won (During 2000, on average,1,000 won = 0.85 approx.; or US$0.87 approx.) (Kim, J. W., 2005, p. 40). Welfare

services provided by the family, including private income transfers and managing

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Table 2. Public social expenditure in 30 OECD countries as a percentage of GDP,1990-2001

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Australia 14.2 15.3 16.3 16.5 16.2 17.8 18.0 17.7 17.8 17.5 18.6 18.0

Austria 24.1 24.4 25.0 26.6 27.3 26.6 26.7 26.0 25.7 26.1 26.0 26.0

Belgium 26.9 27.7 28.4 29.9 29.2 28.1 28.6 27.5 27.5 27.2 26.7 27.2

Canada 18.6 21.1 21.8 21.6 20.6 19.6 18.8 18.3 18.4 17.4 17.3 17.8

Czech Republic 17.0 18.3 18.7 19.2 19.2 18.9 18.8 19.7 19.5 19.8 20.3 20.1

Denmark 29.3 30.2 30.7 32.3 33.1 32.4 31.7 30.7 30.2 29.8 28.9 29.2

Finland 24.8 29.9 33.9 33.9 33.1 31.1 30.9 28.7 26.5 26.1 24.5 24.8

France 26.6 27.2 28.0 29.5 29.3 29.2 29.4 29.4 29.0 28.9 28.3 28.5

Germany 22.8 24.9 26.4 26.9 26.9 27.5 28.1 27.6 27.4 27.4 27.2 27.4

Greece 20.9 20.1 20.2 21.1 21.2 21.4 22.1 22.1 22.8 23.6 23.6 24.3

Hungary NA NA NA NA NA NA NA NA NA 20.8 20.0 20.1

Iceland 16.4 17.1 17.8 18.2 18.4 19.0 18.8 18.5 18.7 19.6 19.7 19.8

Ireland 18.6 19.5 20.4 20.3 20.0 19.4 18.2 16.8 15.6 14.2 13.6 13.8

Italy 23.3 23.5 24.3 24.7 24.4 23.0 23.5 24.2 23.7 24.1 24.1 24.4

Japan 11.2 11.3 11.8 12.4 13.0 13.5 13.7 13.8 14.5 15.1 16.1 16.9

Korea 3.1 2.9 3.2 3.3 3.4 3.6 3.9 4.2 5.9 6.9 5.6 6.1

Luxembourg 21.9 22.4 22.8 23.1 23.0 23.8 23.9 22.6 21.7 21.5 20.0 20.8

Mexico 3.8 4.3 4.6 4.9 5.4 5.4 4.9 5.0 4.9 5.0 5.0 5.1

Netherlands 27.6 27.7 28.3 28.6 27.2 25.6 24.4 24.0 23.0 22.5 21.8 21.8

New Zealand 21.9 22.3 22.2 20.4 19.4 18.9 18.8 19.8 20.0 19.5 19.2 18.5

Norway 24.7 25.7 26.8 26.7 26.4 26.0 24.9 24.1 25.7 25.8 23.0 23.9

Poland 15.5 22.1 26.2 25.6 24.4 23.8 23.9 23.3 22.0 22.2 21.9 23.0

Portugal 13.9 14.9 15.6 27.2 17.3 18.0 19.1 18.9 19.1 19.8 20.5 21.1

Slovakia NA NA NA NA NA 19.2 19.1 18.7 19.0 18.9 18.3 17.9

Spain 19.5 20.3 21.4 22.5 22.0 21.4 21.6 20.9 20.3 19.9 19.9 19.6

Sweden 30.8 32.4 35.3 36.8 35.4 33.2 32.7 31.3 31.1 30.6 29.5 29.8

Switzerland 17.9 19.3 21.3 23.0 23.2 23.9 25.0 26.0 25.9 26.1 25.4 26.4

Turkey 7.6 8.2 8.5 8.3 7.9 7.5 9.7 10.8 11.1 13.2 NA NA

United Kingdom 19.5 21.1 23.1 23.7 23.2 23.0 22.8 22.0 21.5 21.2 21.7 21.8

United States 13.4 14.5 15.2 15.4 15.4 15.4 15.2 14.9 14.4 14.2 14.2 14.7

OECD-30 NA NA NA NA NA NA NA NA NA 20.8 20.6 20.9

Source: OECD, 2004a. NA: not available.

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Political and economic factors instrumental to thedevelopment of the residual welfare regime in Korea

It can be argued that numerous factors have been instrumental in the developmentof the residual type of welfare regime in Korea. Inter alia , the present study sees thelegacy of the growth-rst ideology, based on the growth-rst-and-distribution-later principle, as the most important one. This ideology has remained thedominant approach favoured by the majority of Koreas political and economicdecision-makers since the period of authoritarian rule (1961-1993) and continuingthrough to the present era of neo-liberal globalization. The primary reason forfocusing on the ideological practices of political and economic decision-makers istwofold. First, no single individual in the Korean government is free from the legacy

of political and economic development of the previous four decades. Second, thereis evidence that the main reason for public social expenditure in Korea remaining solow relative to that of other countries with similar economic wealth (and althoughits capacity for social expenditure has increased as a result of rapid economicgrowth) reects a lack of political tenacity on the part of policy-makers, who havethe most political clout to effect reform. Accordingly, in order to understand why the welfare system in Korea approaches a residual model today, it is rst necessary to consider the central philosophy towards economic policy a philosophy sharedby the political and economic elites who have regulated all national policies, includ-ing social welfare policy, for the past fty years.

It could be said that the growth-rst doctrine followed during the develop-ment period (1960s and 1970s) was based, to a large extent, on strong stateintervention and regulation of the market, banks and large companies ( chaebols).However, the fundamental approach of the Korean government toward socialpolicy was closer to neo-classical economic theory which emphasizes economicefciency, production and performance rather than social welfare. During thisperiod, the Korean government upheld the view that a variety of socio-economicgoals, such as better incomes and wealth distribution, social benets, employmentexpansion, and the improvement of working conditions and living standards,

could be achieved automatically by a trickle-down effect generated by rapideconomic development. Accordingly, state intervention or government subsidiesthrough the introduction of institutional social policies and legislation, includingincome redistribution, were regarded as not only detrimental to the governmentsefforts to achieve social goals, but also a hindrance to national economic develop-ment. As a consequence of the inuence of growth-oriented goals, the status of government departments dealing with economic affairs e.g. the EconomicPlanning Board (EPB) was elevated to that of a central state agency to controland oversee all national policies, while those taking charge of social issues were

marginalized (Jung, 2002, p. 441). Not surprisingly, as rapid economic growth was

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emphasized nationwide, most of Koreas national resources were invested in theeconomic sector (Na, 1996, pp. 10-11).

The growth-rst policy of the countrys development period has since

maintained its central position in the economic policy framework of the Koreangovernment. This is evidenced by the relatively weak commitment of the Koreangovernment to achieve better social welfare. For example, in a comparative study conducted and published recently on the expenditure levels of selected governmentdepartments in 18 OECD countries, economic policy accounts for 25.5 per cent of total government expenditure in Korea. This gure is approximately 2.5 timesgreater than the average expenditure rate of 10.2 per cent in the surveyed OECDcountries (Park, 2005, pp. 32-4, cited in Choi, 2005, p. 464). In contrast, public socialexpenditure in Korea accounts for only 9.4 per cent of total government expendi-

ture. This gure equates to approximately one quarter of the average expenditure of 37.4 per cent for all 30 OECD countries (ibid), thus underlining the relative priority that successive Korean governments have placed on economic growth and socialissues since the development period. From the outset, Koreas social welfare policy has been considered secondary to economic policy and its role limited to comple-menting the market economy. In other words, in a context of market competition,it has aimed to compensate ex post the economic losers (Choi, 2005, p. 456). Hence,it was perhaps inevitable that Korea developed a residual welfare system (Hong andSong, 2003, p. 210).

Welfare reform, as carried out under the motto of productive welfare by theKim Dae-Jung administration following the nancial crisis of 1997, was premisedupon economic efciency rather than fair distribution or social equity. The reformsought to place the emphasis on a type of social welfare deemed conducive toeconomic growth. The ideology of productive welfare, with a strongly neo-liberalleaning, has also consistently been emphasized together with independence andindividual autonomy by the current government, which took ofce in early 2003.Furthermore, the Ministry of Finance and Economy (MOFE) appears to be adher-ing to the adage that Without economic growth, a better distribution is difcult(Dongailbo, 2004, cited in Kim, S.Y. 2005,p. 261). This ideology, which believes that

social policy may hinder economic growth and accelerate economic crisis, remainsdeep-rooted among the policymakers of today, particularly those dealing with eco-nomic affairs. Given that these government ofcials, who still hold to the growth-orienteddoctrine of the development period,have led the neo-liberal restructuringsince the nancial crisis of 1997, social policy in Korea has become further margin-alized. Accordingly, social policys status is still viewed as secondary to that of economic policy while residualism in Koreas social welfare system has been con-solidated further.

Despite the perception that Korea lags far behind European welfare states, some

may argue that it has made increasing efforts to construct a social safety net while

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simultaneously pursuing economic growth. Indeed, the Korean government intro-duced a public assistance programme in the 1960s, as well as initiating industrialaccident compensation insurance and health insurance in the 1970s. During the

1980s, it implemented a national pension scheme and expanded the coverage of health insurance. In the mid-1990s, it introduced employment insurance andexpanded the coverage of the national pension. Following the nancial crisis, itestablished the National Basic Livelihood Security System (NBLSS), and furtherextended coverage under the four national social insurance programmes. However,and despite the apparent stable development of a national social policy, this argu-ment can be challenged. The evidence suggests that a national social policy in Koreawas developed mainly to induce rapid economic development and to compensatethe losers arising from this process. It was not developed to achieve egalitarian

fairness, as is arguably the case in such institutional welfare states as Sweden andFinland. Koreas health insurance, for example, was launched as a tool to increaselabour supply during the development period, and the national pension was imple-mented originally to garner funds to assist the construction industry and smallbusinesses (Kim, Y. B., 2002). Such practices were never witnessed in conservativeBismarckian welfare states such as Germany, which introduced its national socialinsurance system as a means of soothing the predicted antipathy of the workingclass (ibid). Furthermore, the welfare system in Korea was also used as a politicaltool to secure the legitimacy of, and support for, military regimes in times past. Asa result, the system was organized without any foresight or future consideration,rather than with clear long-term visions or objectives (Jung, 2002, p. 441; Kwon,S. W., 2002). As evidence of this argument, we can look to the Fourth and the FifthFive-Year Economic Plans proposed by military regimes in search of legitimacy.Both plans mentioned the importance of social policy, but ostensibly as means by which to garner favourable support from the population only (Kwon, S. W., 2002).Meanwhile, the military regimes actively protected special groups, such as profes-sional soldiers, government employees and teachers, with a very generous welfaresystem because they were viewed as indispensable for the management of thecountry during the process of rapid industrialization. At the same time, however,

the working class was intentionally excluded from social welfare although theircontributions to Korean society were deemed signicant (Jung, 2002, p. 441).

According to the power resources model (Korpi, 1980; 1983), the emergence anddevelopment of welfare states require unied action by social democratic groups,including trade unions and left-wing political parties, to exert pressure on capital.However, in the context of Korea, the power of trade unions, which representKoreas social democratic interests, has consistently been weakened by the Koreangovernments repressive labour policy. Major indices to gauge the power resourcesof trade unions include degrees of union density and coverage. Signicantly, when

these two factors are examined, one discovers that union density has decreased over

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time in Korea, with the degree of union density in Korea in 2000 standing at only 11per cent rendering it 29 th among 30 OECD countries (OECD, 2004b, p. 145). Inturn, the degree of union coverage in Korea currently stands at less than 20 per cent,

which is very low when compared to the 80 to 90 per cent found in Europeancountries (Freeman and Katz, 1995; Kim, Y. S., 2005, p. 67).

Low degrees of union density and coverage are closely associated with the factthat trade unions in Korea are organized by individual companies, rather than by individual industrial sectors. Due to this unique union structure, trade unions havetended to stress only the interests of their members rather than the interests of theentire workforce of the same profession, including non-standard workers or thoseemployed in small companies. This situation has impacted negatively on the labourmovement and solidarity among workers in Korea. As the number of non-standard

workers has increased rapidly, in particular as a direct result of the neo-liberallabour policy of the Korean government since the nancial crisis, the polarization of labour between standard workers employed in large companies and those employedin small companies, as well as between standard and non-standard workers, haswidened further in all respects i.e. wages, welfare, job training, employmentsecurity and working conditions.

In short, the political inuence and power resources of trade unions in Koreahave been weakened over time. This has been as a result not only of the Koreangovernments repressive labour policy, but also of the extremely decentralizedlabour-management relationship (due to union structure formations organized by individual companies) and, in particular, the tacit support of the Korean govern-ment for labour exibility following the nancial crisis. Together, these elementshave caused a further widening of labour polarization and have weakened solidarity.Given this scenario, it is perhaps not surprising that the inuence of trade unionsupon the development of the welfare state in Korea has been minimal.

Signicantly, since the 1997 nancial crisis, the Korean government has admin-istered the restructuring of four sectors nance, chaebols, public corporations andlabour under its relief nancing agreement with the International Monetary Fund (IMF). As a result of implemented and proposed changes, the unique eco-

nomic structure of Korea, which has been the basis of the countrys rapid economicgrowth otherwise known as Korea Inc. has rapidly dissolved. The traditionaleconomic structure has been replaced by what may be characterized as WesternEuropean neo-liberalism, which emphasizes privatization, trade-investment-nance liberalization, labour exibility, conservative budget spending, anti-ination policy, welfare cutbacks and deregulation.

Most present-day political and economic decision-makers in Korea, togetherwith a large number of scholars and theorists, actively support such neo-liberalrestructuring under the theoretical veil of a democratic market economy. They

rmly believe that the realization of a neo-liberal economic system as rapidly and

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effectively as possible, and at any price, will solve all the problems Korea has beenfacing recently, such as economic downturn, high unemployment, and the worsen-ing structure of redistribution (Choi, 2005, p. 464). Unfortunately, the neo-liberal

restructuring process has not produced the positive results that were expected by many i.e. optimized distribution of resources and economic growth through theintroduction of advanced management techniques, and improvements in trans-parency and accountability of the domestic economic structure. The purportedeconomic benets arising from the trickle-down effect that many proponents of neo-liberal restructuring had initially advanced have not materialized. Instead, therestructuring process has inicted often-severe hardship on the majority of those inthe middle and working classes.

Despite growing awareness of the negative effects of neo-liberal restructuring

upon the lives of ordinary people, most political and economic policy makers inKorea continue, without fail, to advocate neo-liberal restructuring. This suggeststhat those individuals who are best positioned to inuence Korean society continueto value market efciency and economic growth over social welfare, while they havealso yet to detach themselves from the authoritarian welfare model of the past.Given this understanding, it seems inevitable that Koreas future welfare policy willprogress within the framework of the free market and on the basis of the existingresidual welfare model.

Conclusion

The welfare regime in Korea today is best characterized as a residual model in whichthe responsibility for the provision of social welfare is left mostly to the family andthe private market economy. Under this characterization, the welfare regime caterslargely only for those who are excluded from family and private market economy support. As supportive evidence of this view, one may cite the underdevelopedsocial insurance system, an antiquated social welfare service sector, and theextremely low level of public social expenditure relative to that of all other OECDcountries. The fundamental reasons for this situation are closely associated with the

legacy of the growth-rst ideology, which has remained dominant amongst themajority of Koreas political and economic decision-makers since the 1960s, as it iswith the process of neo-liberal restructuring adopted following the nancial crisisof 1997. In essence, the role of the social welfare system in Korea has essentially beento complement market competition, with the aim of helping induce faster economicgrowth. This is a characteristic not found in the institutional welfare framework, inwhich social welfare programmes are introduced and implemented in order toconstruct a universal and comprehensive welfare system. From the perspective of the institutional welfare framework, welfare programmes are understood to serve

not only the poorer members of society but all citizens; they are a way to realize

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Park_Revisiting the Welfare System in the Rep. of Korea_2008

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