Looking Back at Korea From Chiayi, Taiwan

[Seoul Sinmun · Open World · December 20, 2014]

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA) and Adjunct Professor of Economics at Korea University

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA)

I attended an academic conference held at National Chung Cheng University in Chiayi, Taiwan. Since East Asian countries share common concerns regarding low fertility and population aging, there was high interest in childcare policies, public pensions, and long-term care insurance. In particular, the low total fertility rate (the fertility rate of women of childbearing age) in the East Asian region drew attention. While South Korea is at a very low level of 1.18, Taiwan is said to be even lower, falling below 1. The United Nations sets the replacement-level fertility rate—the fertility rate required to maintain the current population—at 2.1. Japan, which has recently shown a recovery trend, is in the best situation at 1.4, but considering that most developed Western countries are above 1.7, the fertility rates in East Asia are at a catastrophic level. Given this situation, the participants of the conference focused their interest on what type of welfare state should be constructed, how to secure the financial resources necessary to maintain a welfare state, and through what delivery system it should be managed and operated. According to Professor Shogo of the University of Tokyo, there are now more opinions in Japan favoring an increase in welfare spending even if it requires a significant burden compared to ten years ago. Professor Kamimura of Nagoya University raised a question about how to resolve the bottleneck of welfare costs. As public perception in South Korea is changing in a direction similar to Japan, it seems that the time has come for us to seriously consider the procurement of financial resources.

Professor Mi Hong of Zhejiang University was considering a plan to integrate the collection of health insurance and long-term care insurance contributions to meet the increasing demand for medical services, such as long-term care insurance, resulting from China's rapid aging and to secure the necessary financial resources. Research Fellow Tai of the University of Queensland in Australia used data from the Organisation for Economic Co-operation and Development (OECD) to show that there is a tendency for the child poverty rate to increase when the elderly poverty rate decreases. This served as a reminder that policy is ultimately a matter of choice. In the midst of this, the data presented by Professor Shogo was impressive. It was data showing that while the difference in life expectancy between South Korea and Japan has narrowed significantly, there remains a substantial gap between the two countries in healthy life expectancy—the period during which one can move freely even as an older person. This suggests that the burden resulting from population aging will be much greater for South Korea than for Japan.

In a situation where there is much interest in the European style, particularly the Nordic welfare model including Sweden, Professor Estevez-Abe of Syracuse University raised a meaningful point. She pointed out that it seems problematic to set Northern Europe, such as Sweden with its small population, as the desirable welfare model while pushing the United States, Japan, and China—which account for a significant portion of the world's population—out of the center of welfare models. She also noted that there are problems with the OECD's social security expenditure standards, which represent European values. This is because tax support policies widely used in countries like the United States are not captured in the OECD social security expenditure statistics. Although they are still in the early stages, we should use our various tax support policies—such as the Earned Income Tax Credit introduced to boost the will to work among low-income workers and 'Durunuri Social Insurance' which supports contributions for low-income workers—and various examples such as severance pay (8.3% of monthly salary), which is similar to social security expenditure in reality but not captured in SOCX, the official OECD social security expenditure statistics, as evidence to point out the problems with the calculation method of mainstream OECD social security expenditure statistics armed with European values. This is because an increase in welfare spending is inevitable to satisfy the increased welfare demands of the people, yet even welfare-oriented spending is not being properly recorded as social security expenditure.

We must clarify whether South Korea's welfare spending, which is frequently cited by expert groups and the media as the lowest among OECD member countries, is truly at the lowest level and where the reason for this comes from. If we consider issues such as time inconsistency—where spending appears lower than that of OECD member countries because the introduced systems have not yet entered a mature stage—the evaluation of our social security expenditure level could change, at least in terms of policy direction. Blindly comparing averages in a situation where there are significant differences in socio-economic conditions is more likely to be harmful than beneficial. To wear clothes that fit our body, we need a ruler that can measure dimensions accurately. This is why I felt that a re-evaluation of the welfare reality and social security expenditure level of the Republic of Korea was necessary in Chiayi.

Source: Seoul Sinmun (original article)