What is the status of the Korean welfare state? How can it be characterized? What are the major challenges and what - if anything - can be learnt from the experiences of welfare states in other areas? Will Korea move towards a welfare state in the Western European style?

In all societies, a number of distinct providers offer welfare: the family, the market, the state and civil society (formal and informal groups, organizations and networks).

Welfare regimes

Building on earlier conceptualizations of different types of social policy, the Danish sociologist Esping-Andersen spelled out a notion of distinct "welfare regimes" in his book "The Three Worlds of Welfare Capitalism" from 1990. Something reminiscent of a "typology industry," with competing concepts, labels and "brands," has since emerged in the scholarly international literature. Distinctions are normally made between welfare states as to the relative role of markets and the state; of emphasis on social status maintenance vs. redistribution and equality; of the extent of provision of means-tested vs. universal transfers and services; and of the status of social rights. Crude distinctions between liberal, conservative-corporatist and social democratic welfare states have been made, and model country-empirical examples of each have been suggested, namely the United States, Germany and Sweden, respectively.

The political ideological labels can certainly be questioned both on theoretical and historical empirical grounds, but let that be here. In liberal welfare states markets and means testing play a relatively strong role; conservative-corporatist welfare states show an emphasis on labor market participation and status maintenance; and social democratic welfare states are known to hoist the flag of universalism and a strong welfare role for the state. Some scholars have added a fourth category, exemplified by Southern European countries, which portray elements of all the other types of welfare states, but where in addition the family plays a relatively stronger role in overall welfare provision.

Hybridization

One may question to what extent these conceptualizations and empirical exemplifications make much sense given a number of social policy reforms which have drawn different parts of welfare systems in different directions in Western welfare states during the last 15-20 years, e.g. Scandinavian countries adapting ideas from liberal welfare states in the area of labor market policies, and Germany openly learning from Scandinavian countries in the field of family policies. And, in general, cutting across types of welfare states, reform debates are in neo-liberal OECD-speak framed by concepts like workfare, self-reliance, targeting and incentives. Some basic patterns of differentiation can still be identified among Western welfare states, but a trend towards hybridization of distinct welfare types or models can also be observed. Be that as it may. Of greater interest here is that a number of scholars have during the last decade or so proposed that a new type or model of welfare provision should be added to the earlier typologies, a distinct East Asian model of welfare provision, to which Korea would belong. The labels vary from "Confucian welfare states" to "productivist welfare capitalism," to "liberal welfare capitalism," and to simply the "East Asian welfare model." Though it is hazardous to lump all East Asian countries into one category, just as it is problematic to group European countries into one category of welfare states, it might be claimed that a certain cultural heritage is largely shared: Confucian family solidarity; paternalism; emphasis on diligence, work ethic, self-reliance, an entrepreneurial spirit and education.

East Asian model

Obviously, not all of these features would be particular to East Asian societies. But perhaps it can be said that they appear in a unique package setting this region culturally apart from other regions of the world, and in a way which assumedly would have an impact upon, at least, initial welfare policy development in a developing, modernizing (and democratizing) economy. However, countries also learn from each other, and international organizations play a more and more visible role analyzing, disseminating and recommending policy ideas. Can indigenous cultures withstand the dynamic impact of economic and political transformation in a globalized world? Studies have found that Korea and other East Asian countries tend to have low social expenditures, low benefit levels, and high priority for spending on education. The state has generally been very important for the development of the miracle economies, but not so much for the provision of welfare. Let me review some comparative, quantitative data which put Korea in an OECD-context.

Korea's economic development during the last 50 years has been spectacular. During the period 1965-1990 average annual growth of gross domestic product per capita was 7.4 percent. As of today, the country is far from poor in a global comparison. Among the 30 countries of the OECD area, it is far from the poorest, but not among the richest, countries as measured by GDP per capita. Korea remains one of the fastest growing economies of the OECD. Only Ireland scored a higher average annual real GDP growth during 1992-2005; 7.1 percent vs. 5.2 percent, while the OECD average was 2.6 percent. This is quite remarkable since the period covers the 1997-98 Asian financial crisis which hit Korea hard. But a rapidly growing economy clearly does not translate into rapid growth of public social expenditures. Public social expenditure has increased substantially in Korea during the last 10 years, but according to the OECD Factbook 2007, which offers the most recent (from 2003) comparative data on social expenditure among OECD countries, Korea was still the country with the lowest gross social expenditure as a percentage of GDP. The OECD-average was in 2003 20.6 percent. Sweden on top spent 31.3 percent of (a bigger) GDP on social expenditure while Korea at the lower end spent 5.7 percent (others have given recent figures to be above 7 percent and even 9 percent, but in any case, the figure is low in an OECD-comparison). Public spending on old age and survivor pensions accounted for more than 12 percent of GDP in many European countries, while Korea was among the geographically heterogeneous group of countries that spent less than 4 percent: Australia, Iceland, Ireland, Mexico and Turkey. As to publicly supported childcare and early education services, average public spending across the OECD world was just below 1 percent of GDP, but with considerable cross-country variation: from about 0.2 percent of GDP in Korea (again at the lower end) to over 2 percent of GDP in Denmark on top.

Legacy of Confucianism

The lack of concordance between economic growth, size of the economy and growth and size of public social expenditures may be interpreted in different ways. It may be that the comparable objective need for stronger public welfare commitment is not present in Korea; or that it takes time for growth of social expenditures to catch up with increased ability of government to tax and pay for social transfers and services; or low public social expenditures may simply mean that the government and parliament for reasons of values and ideological preferences do not give priority to developing a more comprehensive, generous and redistributive welfare state. Some scholars in Korea and internationally would claim that the legacy of Confucianism - which admittedly can mean many things - prevents development of a welfare state of (any) Western type in Korea (and in some other East Asian nations).

The quantitative figures seem to indicate a limited public commitment and modest levels of benefits and services. Some selected additional quantitative figures corroborate indirect indications of an overall welfare system with qualitative features resembling the so-called liberal or residual welfare states rather than more comprehensive and expensive welfare states of Continental and Northern Europe. When it comes to mandatory private social spending, Korea is above the OECD-average, 2.2 percent vs. 1.1 percent of GDP, and Korea is second only to the United States when looking at the share of private (mandatory and voluntary) social spending in total social spending: Korea 29.6 percent; the United States 38.3 percent; while the share of private spending in total social spending in the core representatives of the "Scandinavian welfare model," Denmark, Norway and Sweden varied between 8.3 percent and 9.4 percent. These figures, although concealing qualitative institutional characteristics, all serve to indicate that there exists a variety of welfare states in the OECD area, and that Korea at this moment seems to be far from a European or - even more so - Scandinavian track of development.

But what about qualitative characteristics? Do they indicate another profile of the Korean welfare state? The introduction of social welfare programs in Korea from the early 1960s is widely interpreted as part of a political strategy aimed at enhancing the legitimacy of the political regime after the military coup d'etat in 1961. Historically, regime legitimacy was also Bismarck's concern and motivation when introducing social insurance in Germany in the 1880s. A pension act for government employees introduced in 1960 was reformed and extended in 1962; a child welfare act was introduced in 1961; the first limited, but compulsory, industrial accident insurance came in 1963, and in the same year also national (voluntary) health or medical insurance. A national welfare pension act was passed in 1973, but implementation postponed, and a general national pension program was not enacted until 1986 and implemented in 1988, after the democratic breakthrough. The national health insurance was expanded under the banner of social justice the same year. A minimum wage act came in 1986. Many (limited) social programs were introduced during the period of authoritarian governments, but without sapping government budgets. Since democratization, many and principally significant welfare policy developments have taken place, e.g. the implementation of the employment insurance act in 1995, rapidly extended and universalized, partly as a response to the 1997 financial crisis, but leaving out the large - and growing - number of nonregular workers; introduction of the minimum livelihood guarantee act (now: national basic livelihood security system); restructuring of the (since 1989, universal) national health system (with health care mainly delivered by the private sector) and expansion of the national pension system to cover "all citizens" in 1999, but it is compulsory insurance only for employees and self-employed and voluntary for "housewives and students." Both the Kim-Young-sam's and Kim-Dae-jung's governments promoted welfare as a social right, and especially under the latter a more coherent political and philosophical vision of productive welfare was promoted, and the goal of a welfare state was professed. Welfare was regarded as a core state activity. State responsibility for welfare increased and was envisaged to further increase. Productive welfare has basically been carried on under the slogan of participatory welfare under the Roh Moo-hyun government since 2002, with universalism, emphasis on the role of government, and participation as three key concepts. Persistent poverty among some groups, especially the old, and increasing inequality, have motivated the government to introduce new welfare programs, such as housing policy for the poor and homeless; policy for poor children and for the working poor.

Low-spending welfare state

So, where is the Korean welfare state headed? Is it maturing as a liberal, conservative, social democratic, Confucian or East Asian welfare state? Or as a new hybrid without a proper name? The Korean welfare state is institutionally both more universal and comprehensive than the American welfare state, making it more "European," although it is - like all East Asian welfare states - a low-spending welfare state. Both elements of actual reforms and programmatic statements make Korea more European than American in welfare outlook. But some observers would claim that the majority of politicians and bureaucrats still believe that welfare plays a harmful role in economic growth, while many of their European counterparts would argue that a developed, consolidated welfare state is a prerequisite for balanced, harmonious economic growth, especially in a globalized world where countries are more exposed than before to trends in the international economy beyond national control. Particularly in the small, open economies and long-lived democracies in Scandinavia many would argue, with a great amount of empirical justification, that a developed, consolidated welfare state is a prerequisite for a balanced and smooth economic development. The Scandinavian states rank among the highest in the world on lists of human development; economic success; scope of welfare state; size of public sector; income equality; gender equality; employment; trust in democratic institutions and people; and economic competitiveness. Comprehensive welfare states and economic growth are not incompatible. Economic development and welfare state expansion can successfully go hand in hand. But no welfare state is static, it is continuously monitored and democratically adapted with lesser or greater success to changing societal needs. The recent era of economic globalization has not led to a "race-to-the-bottom" of European welfare states. Welfare state deconstruction is not on the stocks, while continuous reforms for welfare state reconstruction are high on the political agenda.

Rising inequality and relative poverty are social challenges in present day Korea, and so are changing life styles and family structures, and the aging of the population. Significant attention to what the government can and should do about crucial welfare issues is needed. The perhaps biggest challenge for the economic and welfare (state) prospects of Korea is the low birth-rate. In 2005 Korea had among the very lowest fertility rates in the world. Korean women now on average give birth to one child each, far, far below population reproduction level. So, a topical question must be, what can the Korean government do to promote a balanced, sustainable demographic structure which is a prerequisite both for economic and social (and welfare state) development? What can be learnt from Scandinavia and Europe as to reconciliation of work and family; as to gender equality; and family policies to encourage both higher female participation in the labor force and higher birth rates? Perhaps Korea feels the pressure and urge to be innovative in population policies: create incentives for young families to have more children, e.g. introduce a substantial cash premium for women who give births to two and three children? But in general, a question of cultural implications remains: Are the higher taxes and the broader tax-basis necessary to finance more state welfare a realistic political option in Korea? Can (neo-) liberal and conservative political forces in Korea accept a welfare state closer to a European and Scandinavian format - for which a broad political liberal-conservative-social democratic consensus has developed over the post-World War II period in Europe?

Whether the Korean welfare state should go further in a "European" direction than it already has is a political question, but it is hard to see how it can avoid it if the government and majority of voters endorse the principle of universalism and favor limited social inequality, and want to seriously deal with both persistent and new, growing social challenges.

By Stein Kuhnle

2007.07.18