Back To Top
National

[KH Explains] Universal basic income enters Korean political limelight

Gov. Lee’s progressive social welfare concept faces political hurdles ahead of presidential race

A man pulls a trolley past a closed store in Sinchon district of Seoul on Nov. 28, 2020. (Yonhap)
A man pulls a trolley past a closed store in Sinchon district of Seoul on Nov. 28, 2020. (Yonhap)
The idea of ensuring that everyone has at least some income has gained momentum in South Korea as the country experiences a major economic letdown during the COVID-19 pandemic.

The idea, championed first by Gyeonggi Province governor and president hopeful Lee Jae-myung, has quickly become a fiercely debated topic among presidential contenders from all sides.

Proponents say it is a means to narrow the growing wealth gap and make up for future job losses. Naysayers worry that what they call the “populist measure” would further deplete the state’s coffers and fail to effectively assist the population hit by the pandemic.

While the opposing sides argue, confusion remains over how the system would work and what it would entail. Neither side can say for sure whether basic income will be part of Korea’s post-COVID-19 era.

In this story, The Korea Herald will try to answer some of the questions our readers may have about Korea’s approach to basic income and the hurdles it faces on the way to becoming national policy.


Q. What is universal basic income? Whose idea is this?

A. The idea dates as far back as the 16th century, but the discussion came back to life recently in Korea with a hard push from Gyeonggi Province Gov. Lee Jae-myung.

The left-wing progressive politician affiliated with the ruling Democratic Party of Korea was among those who expressed support for the idea in 2017, when Finland launched the world’s first national-level trial on 2,000 people.

Lee’s proposal would see every Korean receive 500,000 won ($455) in the first year, 1 million won in the following year, and eventually 500,000 won every month.

The final amount is similar to what a one-person household receives under the state-run Basic Livelihood Security Program for people living in poverty.


Q. How does the governor envision the program being funded?

A. According to Lee it would take 26 trillion won, or about 4.7 percent of Korea’s 558 trillion won budget for 2021, to fund the program in its first year. Initially, Lee believes, minor adjustments within the general budget would be sufficient.

To provide 250,000 won per person every quarter, or 1 million won per person every year, Gov. Lee says the state would need an additional 25 trillion won, which could be obtained by terminating existing tax exemption programs.

For the next phase of the program, providing 500,000 won per person every month, some 317 trillion won would be required and Lee acknowledges that tax hikes would be inevitable.

Lee, who has repeatedly called for higher taxes on large corporations and high-income individuals, said in a Facebook post earlier this month that Korea should be prepared to levy more taxes and transition to a welfare state.


Q. Why has this idea gained momentum just now?

A. Lee’s proposal has gained support over the past year as more and more households experienced financial difficulties due to the pandemic.

Strict social distancing rules limited many businesses from operating normally, and it became evident that not everyone had a stable source of income during the pandemic, with Korea posting record-level job and income losses for months at a time.

The concept gained support from the left as a means to revamp the national welfare system and reduce poverty.

As automation and technological advances continue, countries are faced with the prospect of mass unemployment as machines and artificial intelligence increase their presence. And many have hailed universal basic income as a solution.

Universal basic income is also seen as a potential solution to the aging of the population. It could lighten the financial burden of taking care of the increasing number of older people as the workforce shrinks.

But there are big budgetary and political hurdles ahead if the system is ever to become a reality.


Q. How is the reaction to Lee’s plan?

A. The general public appears positive about Lee’s idea. In a recent survey, he emerged as the most favored potential presidential candidate.

But the atmosphere in political circles is very different. The idea has become a topic of debate among presidential hopefuls from all parties.

His proposed universal basic income program is not in line with the Democratic Party’s policies, and criticism has flowed from both within and outside of the ruling party.

Democratic Party Chairman Rep. Lee Nak-yon called Gov. Lee’s plan “infeasible,” saying no country had ever made universal basic income a permanent policy.

Prime Minister Chung Sye-kyun made similar comments in an interview with Bloomberg News, saying “politics based on populism” is “bound to fail.”

Opposition parties’ presidential hopefuls have also denounced Gov. Lee’s proposal, citing similar reasons.


Q. Why does the plan face so much opposition, and what are the possible negative outcomes?

A. Lee’s idea has been criticized primarily for being too radical and unrealistic, so much so that even the liberal ruling party has become a naysayer.

The critics argue that raising more than 300 trillion won every year through additional taxation would overly burden the public.

Finance Minister Hong Nam-ki said in October that “universal basic income is not something to be easily introduced as witnessed in foreign cases, public sentiment and expected financial outcomes.” He said then that it would be difficult to “positively rate the idea of introducing the plan.”

Lee’s idea has also failed to gain support from opposition parties, though some conservatives have expressed support for universal basic income programs if overlapping welfare programs -- such as retirement and disability pension plans -- were eliminated.

For the conservatives, the benefit of such a program is that it would reduce the burden on the state’s welfare system and allow greater freedom of choice for people.

But Lee’s approach is radically different. The governor advocates keeping the current state welfare system in place and adding the universal basic income program to supplement existing programs.

In his vision, the program would increase the government’s role and transform Korea into a welfare state, an agenda that the liberal side has advocated for decades.

As the program would impose a greater financial burden and involve levying more taxes to offset its costs, experts and politicians worry that it could increase Korea’s debt levels faster than the country could adapt and could demotivate people from actively participating in the labor market.


Q. Are there any examples where universal basic income has been tried in the past? How has it turned out for other countries?

A. As Rep. Lee Nak-yon said, there is no country that has ever had a national-level basic income policy in place permanently, but Finland came close.

Switzerland ran a national referendum in 2016 on introducing a universal basic income program, but only 23 percent of voters expressed support while 77 percent were against it.

The Canadian province of Ontario began what was to be a three-year experiment in 2017, providing 4,000 people with 16,989 Canadian dollars ($13,470) per year, but the program was cut short after a conservative government took power.

Finland’s two-year plan, which ran until 2018, paid a monthly income of 560 euros ($680) to 2,000 randomly selected unemployed people without obliging them to actively search for jobs.

A 2019 study from the University of Helsinki later revealed that the experiment had not been successful, as the number of people relying on the program had grown while jobs had not.

“Basic income recipients did not have more work days or higher incomes than those in the control group,” said professor Heikki Hiilamo, author of the study, in a release.

“Despite the fact that basic income recipients had clearly better incentives to work, there were no statistically significant differences between the groups.”

If Korea implements a full-scale basic income program for all its people, it will be the first country in the world to do so. Risks are certainly out there, and that’s why politicians have debated and criticized each other for months.

That agenda could later prove one of the most important topics in discerning the next president as well, as witnessed by immense interest among president hopefuls at this moment.

By Ko Jun-tae (ko.juntae@heraldcorp.com)
MOST POPULAR