The public's interest in quality of life has increased as the economy has grown since the 1990s. Accordingly, a variety of social welfare systems have been introduced, and the total social spending has risen. It exceeded KRW 100 trillion in 2014 for the first time and hit KRW 115.7 trillion in 2015, accounting for 30.8 percent of the central government's total expenditure.
Nevertheless, Korea's public social spending as a percentage of GDP is still only half of the OECD average. Some say that Korea needs to increase its social spending; others say that, given the differences of social and economic circumstances among countries, Korea's social spending is not low compared to other OECD countries.
This report compared the social spending of Korea and OECD countries in consideration of social and economic circumstances and assessed the level of the nation's total social spending and the areas where its social spending is lower. The international comparison index (ICI) was used to evaluate the level of social spending.
The evaluation showed that Korea's social spending was lower than overall OECD countries even in consideration of social and economic conditions. More specifically, the average of the ICI of total public social expenditures over the 1990-2014 period was 61.98. The areas where social spending was relatively low were old age at 35.68; survivor at 75.85, incapacity-related benefit at 20.83; health at 84.33; family at 51.97; active labor market at 46.06; and unemployment at 42.88.
These findings show that the nation could raise its social expenditures to the OECD level if it built a public consensus on them. However, fiscal sustainability would likely deteriorate due to a reduction in tax revenues resulting from the increased social spending caused by the aging of the population and the decline in the economically active population caused by the low birthrate. Thus, the government needs to manage the rate of increase in social spending at a reasonable level.
Han Jungsoo
Nevertheless, Korea's public social spending as a percentage of GDP is still only half of the OECD average. Some say that Korea needs to increase its social spending; others say that, given the differences of social and economic circumstances among countries, Korea's social spending is not low compared to other OECD countries.
This report compared the social spending of Korea and OECD countries in consideration of social and economic circumstances and assessed the level of the nation's total social spending and the areas where its social spending is lower. The international comparison index (ICI) was used to evaluate the level of social spending.
The evaluation showed that Korea's social spending was lower than overall OECD countries even in consideration of social and economic conditions. More specifically, the average of the ICI of total public social expenditures over the 1990-2014 period was 61.98. The areas where social spending was relatively low were old age at 35.68; survivor at 75.85, incapacity-related benefit at 20.83; health at 84.33; family at 51.97; active labor market at 46.06; and unemployment at 42.88.
These findings show that the nation could raise its social expenditures to the OECD level if it built a public consensus on them. However, fiscal sustainability would likely deteriorate due to a reduction in tax revenues resulting from the increased social spending caused by the aging of the population and the decline in the economically active population caused by the low birthrate. Thus, the government needs to manage the rate of increase in social spending at a reasonable level.
Han Jungsoo