Korea Next to Last in Social Welfare Spending

By Lee Hyo-sik
Staff Reporter

South Korea ranked 28th out of the 29 OECD member economies in social welfare spending, indicating the nation has a long way to go before turning itself into an attractive place to live, the Korea Institute for Health and Social Affairs (KIHASA) said Friday.

But expenditure has been increasing at a fast pace over the past few years in line with the rapidly aging population and falling birthrate.

The institute said the government, businesses and individuals here spent a combined 112.2 trillion won on various welfare-related programs in 2008, accounting for 10.95 percent of the nation's gross domestic product (GDP). The 10.95-percent ratio is much lower than the OECD average of 23.7 percent.

Korea lags far behind other advanced economies, with only Mexico spending less on various social welfare programs and services in proportion to its GDP among OECD member countries.

Sweden topped the list with its social expenditure reaching a level equivalent to 32.23 percent of its GDP, closely followed by France at 32.17 percent.

Social welfare expenditure is composed of three categories: a state-sponsored social safety net; corporate pensions and other institutionalized private-sector welfare schemes; and donations, volunteer activities, corporate social contributions and other voluntary social welfare.

Korea's public-sector welfare accounted for 75 percent of the total expenditure, followed by the institutionalized private-sector programs at 5 percent and voluntary private schemes at 20 percent. The country's ratio of public-sector social spending to GDP stood at 8.3 percent, less than half of the OECD average of 20.6 percent.

"Sweden, Germany and other Northern European countries boast of a narrow income disparity between the haves and have-nots, and a low poverty rate among senior citizens, thanks to the large public-sector welfare spending. On the other hand, the income gap and poverty among the elderly are relatively high in Korea, Britain and the United States," KIHASA research fellow Gho Kyeong-hoan said.

However, Korea's welfare spending growth reached an annual average of 10.8 percent from 2004 through 2008, 2.2 times higher than the OECD average of 4.9 percent. Among the OECD members, only Mexico (14.3 percent) and Ireland (13.3) posted a larger spending increase.

Gho said Korea's welfare spending will continue to show an upward curve down the road, with the government having to spend more to care for the elderly and encourage people to have babies.

"On top of the public-sector spending, Koreans will set more money aside for their post-retirement life by making larger contributions to various pension schemes. To better help the socially weak, companies should boost their corporate social offerings, while individuals should make greater donations and engage in volunteer activities," he said.

leehs@koreatimes.co.kr