SPA Annual Conference 2014

Dynamics of the welfare mix structure in Korea: An expenditure study between 2000 and 2010

Jin Wook KIM (Sogang Univ.)

Contents

1. Introduction

2. Background of the research

3. Estimation methods

4. Estimation results by sector

5. Discussions: Korean welfare state and the change of welfare mix expenditure 2000-2010

6. Conclusions

1. Introduction

The term ‘Korean welfare state’ is not unfamiliar

• When did Korea become a welfare state?

• C. Pierson (2006) : introduction/expansion of social insurances, national minimum as a social right, social expenditure around 3-5% of GDP.

• Guidelines above suggest that Korea became a welfare state from no later than 2000.

• What has happened since 2000 in terms of the welfare mix?

Welfare mix approach

• It is not possible to understand the overall welfare provisions in a country unless we take non-state sectors into account.

• Core features of social welfare in Korea until 1990s: relatively underdeveloped state welfare, strong emphasis on the role of enterprise and family in welfare provisions

☞ welfare mix approach is indispensable for analysing Korea’s welfare system.

• The research aims to track the change of the welfare mix structure of Korea between 2000 and 2010, based on the estimations of social welfare spending.

2. Background of the Research – Concept of Welfare Mix

Welfare Pluralism (WP) has a rather political and ideological orientation especially within the British political tradition, arguing that the state-dominated structure of welfare provisions should be pluralized to cope with the problems of state welfare provision.

Mixed Economy of Welfare (MEW) has more economic and managerial concerns like efficiency and effectiveness.

In practice the two terms have identical meanings and can be used interchangeably (Johnson, 1999).

Social Division of Welfare (SDW) was suggested by Titmuss (1956) – social welfare, fiscal welfare and occupational welfare.

Welfare Mix

• there exist ‘functional equivalents’ to the state sector with which the ‘welfare needs’ in a society can be met (Gough and Kim, 2000).

• The level of well being in a society cannot be recognised only as the state’s commitments to social welfare, but can be understood as the result of a wider welfare mix structure incorporating the market, the third sector and the family.

• In this respect, the terminology of the ‘welfare mix’ can be understood as the analytical and empirical concepts for indicating the mixed state of welfare.

2. Background of the Research - Change of Welfare Mix in Welfare States

• Direction of welfare mix change in the era of welfare state transformation:

- The expansion of ‘private arrangements’ (Seeleib-Kaiser, 2000) caused by globalisation, demographic changes, individualism and neo-liberalism

• Convergent environments, divergent responses:- Liberal welfare states – expansion of private sector- Denmark, Sweden – privatisation of pension + public

dominant social services- Southern Europe – expansion of state welfare (esp.

health)

Welfare state1: Construction Deconstruction Reconstruction

Period: ~ mid-1970s ~ mid-1990s Late-1990s ~

Stage of change: Expansion Critiques/retrenchment Reconstitution

Paradigm2: Keynesianism Neo-liberalism Social Investment

Political rhetoric: Post-War Consensus Crisis of welfare state Third way

Nature of risks Market failure/Old social risks

State failure/Welfare dependency

Distribution failure(growing inequality and poverty)/New social risks

Public-private mix Public dominance Expanding private Public-private partnership

1. Leibfried and Mau (2008) 2. Morel, Palier and Palme (2011)Source: Kim and Choi, 2012

Welfare state changes and the public-private mix: summary

International Comparison of Total Social Expenditure: 1990 - 2007

2. Background of the Research - Welfare Mix Models

Triangle Model

• Welfare triangle of Abrahamson (1992). The principles of the three sectors are defined as power, money and solidarity. However, this model has a crucial limitation - an ignorance of the informal sector in the welfare mix.

• Evers (1993): the three angular points comprise state, market and community (informal sector), with the third sector located in the ‘tension field’ where different social spheres and rationales are interwoven and intersect.

• Pestoff (1998) considers three essential dimensions constituting a very elaborate welfare triangle model – public/private, for-profit/non-profit and formal/informal.

Welfare Mix Triangles

3. Estimation methods – welfare pentagon model

Source: Kim, 2004

3. Estimation methods – categories, contents

Sector Categories Contents

1. State

1. Direct Expenditure Social Insurance, Public Assistance, Social Services

2. Tax Expenditure Tax Expenditure related to Social Protection and Health

2. Enterprise

1. Mandatory Welfare Severance Pay, Paid Leave for Sickness or Maternity

2. Voluntary Welfare Voluntary Enterprise Welfare, Training Cost

3. Market

1. Private Health Expenditure Households' Expenditure, Private Health Insurance

2. Life Insurance Life Insurance Expenditure on Death and Injuries

3. Child Care Cost Households' Expenditure on Child Care

4. Individual Pension Life and Non-life insurance expenditure on qualified individual pension

4. Third Sector

1. Concession (Mandatory) Concession of Public Transport, TV Licence, and etc

2. Voluntary Welfare Voluntary Welfare Expenditure of NPOs , CSR expenditure on welfare

3. Health Consumption Expenditure of Health NPOs

5. Family

1. Private Transfer Inter-household Private Income Transfer

2. Caring Monetary Value for Informal Caring

4. Estimation results

5. Discussions – change of welfare mix expenditure

% of GDP

% of Total

state-market-community triangle

% of GDP

% of Total

Summary of findings

• A big increase in overall welfare expenditure between 2000 and 2010 (21.3% 26% of GDP)

• It is the result from the rapid expansion of state welfare

• Structure of the welfare mix expenditure: ‘family>market>state’(2000) ‘state>family>market’ (2010)

• Nevertheless, overall expenditure structure is still ‘mixed’.

• But its nature has been changed from ‘A mixed welfare structure dominated by protective family’ (2000) ‘A mixed welfare structure centered by expanding state welfare’(2010)

6. Conclusions

Implications

• For only 10 years Korean welfare state has changed its welfare mix structure, based on the expansion of state welfare and a relative reduction of enterprise welfare

• Estimation results provide empirical evidences for the growth and expansion of the welfare state in Korea

• Although there has been a clear tendency in growing welfare markets, it has not been outstanding in the welfare mix structure yet because of the rapid expansion of state welfare

• There has been no significant change in the relative importance of family. No clear evidence that the growing public transfers have crowded out private transfers

• The role of civil society and the financial capability of NPOs are still very weak in the welfare mix structure

Limitations of the research

• Expenditure structure provides only partial understanding. It should be very cautious to interpret the findings into the changing nature of Korean welfare state itself.

• It needs further sophistications on estimation methods. Especially the third sector and market.

• There is a possible debate on whether the monetary value of informal caring can be regarded as social welfare spending continuous discussions required.

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