Park - Revisiting The Welfare System in The Rep. of Korea - 2008

Revisiting the welfare state
system in the Republic of Korea

Yong Soo Park
Korea Maritime University, Busan, Republic of Korea
Abstract The Republic of Korea’s welfare system has under-

gone radical institutional expansion since the 1990s, largely as a
consequence of the financial crisis of 1997. In spite of these
changes, public social expenditure remains extremely low —
particularly with regard to all other OECD countries — with
the result that the overall social insurance system and social
welfare service sector remain underdeveloped. Thus, the
current welfare system can best be characterized as a residual
model, in that state intervention as a provider of welfare
remains highly limited and the family and the private market
economy play the central roles in offering a social safety net.
This situation is largely the legacy of the so-called ‘growth-first’ 3
ideology, which has remained the dominant approach favoured
by the majority of the country’s political and economic
decision-makers since the period of authoritarian rule (1961-
1993). The adoption of Western European-style neo-liberal
restructuring, implemented following the 1997 financial crisis,
has also played a role.
Keywords welfare state, public expenditure, political aspect,

evaluation, Republic of Korea, OECD
Introduction
Many commentators have described the characteristics of the welfare system of

the Republic of Korea (hereafter, “Korea”),1 but they have rarely considered the
Address for correspondence: Dr. Y. S. Park, The College of International Studies, Korea Maritime
University, #1, Dongsam-dong, Youngdo-gu,Busan, 606-791 Republic of Korea. Email: yspark9955@
hanmail.net
1. See Kwon H.-J. (1997; 2002); Hong, K. J. (1999); Tang (2000); Cho (2002a; 2002b; 2002c); Hong, T. H.
(2002); Jung (2002); Kim, Y. B. (2002); Kim, Y. M. (ed.) (2002); Nam (2002); Sung (2002); Hong and Song
(2003); Yang (2003; 2005); Bidet (2004); Kim, Y. M. (2004); Kuhnle (2004); Sonn (2005); and Shin
(2006).
© 2008 The author(s) Journal compilation © 2008 International Social Security Association International Social Security Review, Vol. 61, 2/2008
Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Revisiting the welfare state system in the Republic of Korea
historical/structural or political/economic processes that helped to shape its unique

characteristics. The majority of studies that have been conducted in Korea rely
heavily on Esping-Andersen’s (1990; 1999) typology, which was formulated and
based on the advanced welfare states of the West, and focus primarily on investi-
gating apparent analogies between the welfare systems of Korea and those in
Europe. As such, it is perhaps inevitable that a number of important issues — for
instance, how individuals function within the state-market relationship as a result of
welfare policy implementation, and the kinds of political and economic factors that
might be associated with the emergence and development of a particular type of
welfare system in Korea — have rarely been considered by social theorists. This
article aims to redress these problems by examining the Korean welfare system from
the perspective of the typology developed by Wilensky and Lebeaux (1958) that uses
a broader framework to determine the nature of welfare regimes, rather than the
Esping-Andersen model. It also seeks to explain from a historical perspective the
political and economic background against which a particular type of welfare
system has developed in Korea.
The second section of this article examines which model the social welfare
system in Korea more closely resembles — i.e. the residual model or the institutional
4 one. The third section investigates political and economic factors that have played
pivotal roles in the development of the type of welfare system found in Korea, while
the fourth section draws together the principal finding and offers conclusions.
Typology of the welfare state in Korea
Wilensky and Lebeaux (1958) first introduced the terms “residual” and “institu-
tional”. In the residual model, the role of the state is highly restricted while the
individual, the family, the voluntary sector, and the private market economy become
the optimal means of meeting needs and redistributing resources. Public services, as
such, are provided only as a last resort after clear evidence that all other avenues of
support have been exhausted. The assistance offered is usually restricted to a limited
amount of financial support, and is regularly means tested. Even in these limited
cases, the primary goal of state intervention is to maximize individual autonomy,
usually through paid work. In the institutional framework, however, the state
assumes a larger role, while at the same time offering a broader range of services that
are not restricted to a small proportion of the population (i.e. the poor or disad-
vantaged), nor are they regularly means tested.
How the welfare system in Korea should be characterized is a difficult issue. A
reason for this is the common absence of a comprehensive and concrete measure-
ment technique or tool to analyze all aspects of the performance of a country’s
social welfare system, and also because varying outcomes may be produced if the
system is evaluated on the basis of specific aspects alone (Hong and Song, 2003,
International Social Security Review, Vol. 61, 2/2008 © 2008 The author(s) Journal compilation © 2008 International Social Security Association
p. 206; Kim, Y. M., 2004, p. 135). With this in mind, the present section attempts to
consider the characteristics of the welfare system in Korea by focusing on the overall
changes in national social insurance, public assistance, and social welfare services
since the 1990s.
As many statistics indicate, public spending on social welfare in Korea has
increased rapidly since the 1990s (Hong and Song, 2003, p. 209, p. 226; Ko et al.,
1999). This was especially evident during the administration of Kim Dae-Jung, who
took office immediately after the 1997 financial crisis and advocated “productive
welfare” as one of his policy goals. A sweeping reform of the national social welfare
system subsequently followed. A radical increase in public social expenditure and
expanded coverage of national social insurance programmes (national pension,
employment insurance, national health insurance and industrial accident compen-
sation insurance) occurred. At the same time, an attempt was made to build a
universal social security system by reforming public assistance policy. Kim Dae-
Jung’s government also established the Korea Tripartite Commission in 1998, as
part of its efforts to institutionalize cooperation between labour, management and
bureaucracy. This was the first time since the liberation of Korea in 1945 that a
Korean government had officially chosen the expansion of the national social
welfare system as its core policy goal, and subsequently implemented it (Hong and 5
Song, 2003, p. 208).
Some commentators have evaluated the welfare reform initiated by the Kim
Dae-Jung administration as a very positive move, likening it to reforms imple-
mented in the United States during the Great Depression of the 1930s and in the
United Kingdom at the end of the Second World War (Sung, 2002, p. 510). Others
have labelled it the “welfare windstorm” (Kim and Sung, 2003, p. 412).
A clearer picture of the Kim administration’s welfare policies can be established
by examining some of the major areas of the reform. First, the administration
addressed the issue of social insurance, expanding the coverage provided under
employment insurance and industrial accident compensation insurance to all com-
panies with fewer than five employees. Second, the national pension scheme was
revised to cover all citizens between ages 18 and 59 as of 1999.2 Third, it sought to
reduce household expenditure on health care — while at the same time attempting
to elevate the health status of Koreans — through the establishment of the National
Health Insurance Corporation (NHIC) in 1997.
The NHIC was established through the National Health Insurance Act, which
integrated 227 health insurance societies covering self-employed persons with the
health insurance corporations of public servants and private school employees. By
2. The National Pension Scheme for all Korean citizens was provided for by the National Pension Act of
1986, which was implemented in 1988. By 1999, coverage had been extended nationally (MOHW. 2005,
pp. 288-9).
July 2000, all health insurance management systems had been fully integrated. The
Health Insurance Review Agency was set up that same month, and was given the
responsibility of reviewing medical fees and evaluating health care performance.
With its authority established, the agency then implemented a national policy to
institute guidelines for the prescribing and dispensing of medication separately.
Through these measures, it can be said that Korea had finally begun the implemen-
tation of a universal social insurance system to cover all of its citizens (Nam, 2002,
pp. 152-3).
Turning its attention to public assistance policy, the Kim Dae-Jung government
enacted the National Basic Livelihood Security Act in September 1999, and fully
implemented the National Basic Livelihood Security System (NBLSS) in October
2000. The new system marked a significant change in governmental policy, for
unlike the previous system prior to October 2000, the NBLSS provided all people
living below the poverty line with financial benefits regardless of whether they were
capable of work. With such a radical policy change, the number of persons eligible
for assistance under the new system rapidly increased (MOHW, 2005, p. 67).
The Kim Dae-Jung government also addressed labour issues, establishing the
Korea Tripartite Commission and legitimatizing the Korean Confederation of Trade
6 Unions (KCTU). This was an attempt to enhance labour-management cooperation
and to resolve labour issues on the basis of agreement between labour, management
and the government by forming a centralized, corporatist-style consultation system.
All of the governmental measures taken since the 1990s suggest that Korean
administrations have been seriously committed to the institutional expansion of
social welfare. As one of its 12 policy goals, the incoming administration of
Roh Moo-Hyun, who took office in early 2003, declared its intention “to improve
participatory welfare and the quality of life”, and consequently increased social
expenditure on a large scale. Table 1 shows that, between 2002 and 2006, the share
of public social expenditure in Korea’s total government budget increased from 19.9
per cent to 27.9 per cent.
Table 1. Trends in Korea’s public social expenditure as a percentage of the total

government budget, 2002-2006
2002 2003 2004 2005 2006
19.9 20.2 24.5 26.7 27.9
Source: Ofﬁce of the President, Republic of Korea, 2007.
Despite these large-scale efforts, Korea’s welfare system still lags significantly
behind the advanced social welfare programmes of countries with similar-sized
economies. The percentages of wage-earning Korean employees covered by social

insurance in 2001, for example, were at very low levels: 51.8 per cent for the national
pension, 54.3 per cent for national health insurance, and 46.9 per cent for employ-
ment insurance (Lee, H.-G., 2001, p. 6). Also in 2001, the percentage of so-called
non-standard workers covered by social insurance stood at less than 25 per cent
(ibid). This illustrates that, notwithstanding the aforementioned policy changes, the
majority of low-income earners, including standard workers employed in small
companies with fewer than five employees and all non-standard workers, lack an
adequate social safety net. In addition, successive Korean governments’ spending on
national social insurance has been extremely conservative. Social insurance is
funded primarily by contributions from employers and employees, rather than tax,
which suggests that no effective method of income redistribution in the system
exists (Yang, 2003, pp. 421-2; Yang, 2005, p. 396). The future of the national pension,
in particular, has caused considerable concern. Many studies have predicted that
its fund may be exhausted by 2040 or thereabouts — largely as a consequence of
excessively low social insurance coverage rates relative to the increased number of
pension recipients (owing to the rapid aging of the Korean population), as well as
the lack of an adequate administrative infrastructure to assess the income of self-
employed persons (Hong, T. H., 2002, pp. 354-5). 7
With regard to labour policy, it has been argued — as predicted by many at the
time of its establishment — that the Korea Tripartite Commission has not been able
to perform its role sufficiently due to the lack of institutional infrastructure needed
to shore up the agency’s activities (Kim, S. Y., 2005, p. 263). Moreover, as a direct
result of the neo-liberal labour policy (which emphasizes wage and labour flexibil-
ity) that has been advanced since the financial crisis of 1997, the total number of
low-wage non-standard workers has grown significantly. The percentage of non-
standard workers in Korea’s total workforce increased from 45 per cent immediately
following the financial crisis to 55.4 per cent (7.84 million persons) in 2003, 55.9 per
cent (8.16 million persons) in 2004, and 56.1 per cent (8.4 million persons) in 2005
(Choi, T. W., 2006). Presently, Korea ranks first among 30 OECD countries in terms
of its percentage of non-standard workers in the total workforce (ibid). The fact that
non-standard workers now account for the majority of the total labour force in
Korea largely explains why national social insurance only covers approximately
50 per cent of wage earners, in spite of coverage having been rapidly expanded since
the financial crisis.
The integrated national health insurance programme, and the revised policy for
the separate prescribing and dispensing of medication, were implemented under
very difficult circumstances that saw strong opposition from interest groups con-
cerned about the possible negative social repercussions. The fears of many now
seem to have been realized, as evidenced by an inflated budget deficit in the national
health insurance programme and an increased financial burden on the general
population due to sharp increases in health insurance fees (Hong, T. H., 2002,
p. 354). At present, health care charges paid by patients account for more than 50 per
cent of total heath care costs, which signifies that the financial burden placed on
individuals and families with regard to health care expenses is still very significant
(Yang, 2005, p. 396). In addition, the private medical sector’s stake in Korea’s
national health care is extremely large while the share of the public sector is
extremely small; hence, it can be argued that the need for adequate health care for
unemployed people — or those with low incomes — has not yet been met. Cur-
rently, the percentage share of public health services in Korean national health care
is approximately 20 per cent, rendering it the lowest in this category among 30
OECD countries (MOHW, 2005, pp. 375-6).
The National Basic Livelihood Security System (NBLSS), established in 2000,
aims to provide assistance for those in need. Unlike the previous system, the NBLSS
provides financial aid to all people living below the poverty line, regardless of their
capacity to work. However, in order to qualify as an NBLSS recipient, individuals
must provide evidence that they are unable to support themselves and lack sustain-
able support from any other party. The total value of the potential recipient’s
income and property is assessed, and if this is below a predetermined income level
8 specified by the Ministry of Health and Welfare, financial benefits are provided
(MOHW, 2005, p. 69). Given the strict conditions for eligibility, it is not surprising
that only 27.1 per cent of low-income households benefit from the system (Lee and
Choi, 2004). Presently, approximately 8 million people in Korea live below the
poverty line; however, only 1.4 million of these are protected by the NBLSS (Ryu,
2005, p. 172). The remaining 6.6 million people remain without the protection of
a public assistance programme (ibid, p. 172). Furthermore, in order to embody
the concept of productive welfare, the Korean government has introduced a self-
assistance policy under which social benefits are provided on the condition that
NBLSS recipients participate in self-support programmes (MOHW, 2005, p. 69).
The ultimate aim of this particular measure is to prevent the recipients of financial
aid from becoming overly complacent with regard to receiving state assistance. This
approach, which tends to emphasize and force individual autonomy and self-
support, is a feature typical of the residual welfare model.
In the past, the family occupied the most important position in Korea’s social
welfare system. Despite the expansion in coverage of national social insurance
following the financial crisis, the value of private income transfers within the family
still surpasses that of public income transfers. In 2000, private income transfers
totalled 18.3 trillion won (3.5 per cent of GDP), surpassing total income-security
related expenses, including national pension, survivor pension, unemployment
benefit, NBLSS, etc., which totalled 11.8 trillion won (During 2000, on average,
1,000 won = €0.85 approx.; or US$0.87 approx.) (Kim, J. W., 2005, p. 40). Welfare
services provided by the family, including private income transfers and managing
household affairs, account for 37.4 per cent of total welfare expenditure in Korea,
which suggests that the family is still the most important source of welfare provision
in the country’s welfare system (ibid, p. 43). Corporate welfare also accounts for a
large share (22 per cent of total expenditure) in Korea’s present welfare system,
despite the expansion of the public social insurance system since the financial crisis
(ibid, p. 40). The dependence of the national social welfare system on the private
market economy has further increased, with the level of market dominance in the
Korean social welfare sector very high in comparison with that of other countries
(Cho, 2002b, p. 259; Sonn, 2005, p. 222). For example, the private insurance market
— including both private pensions and life insurance — has experienced rapid
growth since the 1990s, and its share of GDP in Korea is now larger than that found
in many other advanced countries (Cho, 2002a; Cho, 2002c; Jung, 2002).
In Korea, the weak role of the state, and a lack of interest in intervention in the
field of social welfare, is evidenced by low levels of public social expenditure, as
outlined in Table 2.3 In the comparative table showing public social expenditure in
30 OECD countries across a 12-year period, Korea occupies the lowest rank almost
consistently. In 2001, public social expenditure in Korea accounted for just 6.1 per
cent of its GDP, while in Sweden, the country with the highest percentage, the level
was 29.8 per cent. The OECD’s average for 2001 was 20.9 per cent. This clearly 9
indicates that public social expenditure in Korea is extremely low when compared to
that of all other OECD countries, with the exception of Mexico.
In short, despite rapid institutional expansion since the 1990s, state intervention
as a provider of welfare has remained at a minimal level. As a result, the family,
which has traditionally functioned as the most important source of welfare provi-
sion, continues in its position as the primary source of social welfare. Meanwhile the
private sector has played an increasingly larger role in recent years. In particular, the
role of corporate welfare, which has supplemented the Korean state welfare system
for many years, has grown significantly. Thus, one could argue that Korea’s welfare
system today is best characterized as a residual model in which the provision of
social welfare is predominantly the responsibility of the family and the private
market economy. Therefore, the welfare system caters mainly to those excluded
from support provided by family and private market economy sources. This then
raises a simple, but very important, question: Why has such a residual welfare
regime developed in Korea? In other words, which identifiable political, social and
economic factors might be associated with the development in Korea of a residual
welfare system? The following section considers this question.
3. OECD defines ‘public social expenditure’ as ‘social allowances or financial support provided by the
public institution for families and individuals in need’. The main social policy areas include old age,
survivors, incapacity-related benefits, health, family, active labour market programmes, unemployment,
housing, and other social policy areas (Ko et al., 2002).
Table 2. Public social expenditure in 30 OECD countries as a percentage of GDP,

1990-2001
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Australia 14.2 15.3 16.3 16.5 16.2 17.8 18.0 17.7 17.8 17.5 18.6 18.0
Austria 24.1 24.4 25.0 26.6 27.3 26.6 26.7 26.0 25.7 26.1 26.0 26.0
Belgium 26.9 27.7 28.4 29.9 29.2 28.1 28.6 27.5 27.5 27.2 26.7 27.2
Canada 18.6 21.1 21.8 21.6 20.6 19.6 18.8 18.3 18.4 17.4 17.3 17.8
Czech Republic 17.0 18.3 18.7 19.2 19.2 18.9 18.8 19.7 19.5 19.8 20.3 20.1
Denmark 29.3 30.2 30.7 32.3 33.1 32.4 31.7 30.7 30.2 29.8 28.9 29.2
Finland 24.8 29.9 33.9 33.9 33.1 31.1 30.9 28.7 26.5 26.1 24.5 24.8
France 26.6 27.2 28.0 29.5 29.3 29.2 29.4 29.4 29.0 28.9 28.3 28.5
Germany 22.8 24.9 26.4 26.9 26.9 27.5 28.1 27.6 27.4 27.4 27.2 27.4
Greece 20.9 20.1 20.2 21.1 21.2 21.4 22.1 22.1 22.8 23.6 23.6 24.3
Hungary NA NA NA NA NA NA NA NA NA 20.8 20.0 20.1
Iceland 16.4 17.1 17.8 18.2 18.4 19.0 18.8 18.5 18.7 19.6 19.7 19.8
Ireland 18.6 19.5 20.4 20.3 20.0 19.4 18.2 16.8 15.6 14.2 13.6 13.8
10
Italy 23.3 23.5 24.3 24.7 24.4 23.0 23.5 24.2 23.7 24.1 24.1 24.4
Japan 11.2 11.3 11.8 12.4 13.0 13.5 13.7 13.8 14.5 15.1 16.1 16.9
Korea 3.1 2.9 3.2 3.3 3.4 3.6 3.9 4.2 5.9 6.9 5.6 6.1
Luxembourg 21.9 22.4 22.8 23.1 23.0 23.8 23.9 22.6 21.7 21.5 20.0 20.8
Mexico 3.8 4.3 4.6 4.9 5.4 5.4 4.9 5.0 4.9 5.0 5.0 5.1
Netherlands 27.6 27.7 28.3 28.6 27.2 25.6 24.4 24.0 23.0 22.5 21.8 21.8
New Zealand 21.9 22.3 22.2 20.4 19.4 18.9 18.8 19.8 20.0 19.5 19.2 18.5
Norway 24.7 25.7 26.8 26.7 26.4 26.0 24.9 24.1 25.7 25.8 23.0 23.9
Poland 15.5 22.1 26.2 25.6 24.4 23.8 23.9 23.3 22.0 22.2 21.9 23.0
Portugal 13.9 14.9 15.6 27.2 17.3 18.0 19.1 18.9 19.1 19.8 20.5 21.1
Slovakia NA NA NA NA NA 19.2 19.1 18.7 19.0 18.9 18.3 17.9
Spain 19.5 20.3 21.4 22.5 22.0 21.4 21.6 20.9 20.3 19.9 19.9 19.6
Sweden 30.8 32.4 35.3 36.8 35.4 33.2 32.7 31.3 31.1 30.6 29.5 29.8
Switzerland 17.9 19.3 21.3 23.0 23.2 23.9 25.0 26.0 25.9 26.1 25.4 26.4
Turkey 7.6 8.2 8.5 8.3 7.9 7.5 9.7 10.8 11.1 13.2 NA NA
United Kingdom 19.5 21.1 23.1 23.7 23.2 23.0 22.8 22.0 21.5 21.2 21.7 21.8
United States 13.4 14.5 15.2 15.4 15.4 15.4 15.2 14.9 14.4 14.2 14.2 14.7
OECD-30 NA NA NA NA NA NA NA NA NA 20.8 20.6 20.9
Source: OECD, 2004a. NA: not available.
Political and economic factors instrumental to the

development of the residual welfare regime in Korea
It can be argued that numerous factors have been instrumental in the development
of the residual type of welfare regime in Korea. Inter alia, the present study sees the
legacy of the “growth-first” ideology, based on the growth-first-and-distribution-
later principle, as the most important one. This ideology has remained the
dominant approach favoured by the majority of Korea’s political and economic
decision-makers since the period of authoritarian rule (1961-1993) and continuing
through to the present era of neo-liberal globalization. The primary reason for
focusing on the ideological practices of political and economic decision-makers is
twofold. First, no single individual in the Korean government is free from the legacy
of political and economic development of the previous four decades. Second, there
is evidence that the main reason for public social expenditure in Korea remaining so
low relative to that of other countries with similar economic wealth (and although
its capacity for social expenditure has increased as a result of rapid economic
growth) reflects a lack of political tenacity on the part of policy-makers, who have
the most political clout to effect reform. Accordingly, in order to understand why
the welfare system in Korea approaches a residual model today, it is first necessary 11
to consider the central philosophy towards economic policy — a philosophy shared
by the political and economic elites who have regulated all national policies, includ-
ing social welfare policy, for the past fifty years.
It could be said that the “growth-first” doctrine followed during the develop-
ment period (1960s and 1970s) was based, to a large extent, on strong state
intervention and regulation of the market, banks and large companies (chaebols).
However, the fundamental approach of the Korean government toward social
policy was closer to neo-classical economic theory — which emphasizes economic
efficiency, production and performance — rather than social welfare. During this
period, the Korean government upheld the view that a variety of socio-economic
goals, such as better incomes and wealth distribution, social benefits, employment
expansion, and the improvement of working conditions and living standards,
could be achieved automatically by a trickle-down effect generated by rapid
economic development. Accordingly, state intervention or government subsidies
through the introduction of institutional social policies and legislation, including
income redistribution, were regarded as not only detrimental to the government’s
efforts to achieve social goals, but also a hindrance to national economic develop-
ment. As a consequence of the influence of growth-oriented goals, the status of
government departments dealing with economic affairs – e.g. the Economic
Planning Board (EPB) — was elevated to that of a central state agency to control
and oversee all national policies, while those taking charge of social issues were
marginalized (Jung, 2002, p. 441). Not surprisingly, as rapid economic growth was
emphasized nationwide, most of Korea’s national resources were invested in the

economic sector (Na, 1996, pp. 10-11).
The “growth-first” policy of the country’s development period has since
maintained its central position in the economic policy framework of the Korean
government. This is evidenced by the relatively weak commitment of the Korean
government to achieve better social welfare. For example, in a comparative study
conducted and published recently on the expenditure levels of selected government
departments in 18 OECD countries, economic policy accounts for 25.5 per cent of
total government expenditure in Korea. This figure is approximately 2.5 times
greater than the average expenditure rate of 10.2 per cent in the surveyed OECD
countries (Park, 2005, pp. 32-4, cited in Choi, 2005, p. 464). In contrast, public social
expenditure in Korea accounts for only 9.4 per cent of total government expendi-
ture. This figure equates to approximately one quarter of the average expenditure of
37.4 per cent for all 30 OECD countries (ibid), thus underlining the relative priority
that successive Korean governments have placed on economic growth and social
issues since the development period. From the outset, Korea’s social welfare policy
has been considered secondary to economic policy and its role limited to comple-
menting the market economy. In other words, in a context of market competition,
12 it has aimed to compensate ex post the economic losers (Choi, 2005, p. 456). Hence,
it was perhaps inevitable that Korea developed a residual welfare system (Hong and
Song, 2003, p. 210).
Welfare reform, as carried out under the motto of “productive welfare” by the
Kim Dae-Jung administration following the financial crisis of 1997, was premised
upon economic efficiency rather than fair distribution or social equity. The reform
sought to place the emphasis on a type of social welfare deemed conducive to
economic growth. The ideology of productive welfare, with a strongly neo-liberal
leaning, has also consistently been emphasized — together with independence and
individual autonomy — by the current government, which took office in early 2003.
Furthermore, the Ministry of Finance and Economy (MOFE) appears to be adher-
ing to the adage that “Without economic growth, a better distribution is difficult”
(Dongailbo, 2004, cited in Kim, S. Y. 2005, p. 261). This ideology, which believes that
social policy may hinder economic growth and accelerate economic crisis, remains
deep-rooted among the policymakers of today, particularly those dealing with eco-
nomic affairs. Given that these government officials, who still hold to the “growth-
oriented” doctrine of the development period, have led the neo-liberal restructuring
since the financial crisis of 1997, social policy in Korea has become further margin-
alized. Accordingly, social policy’s status is still viewed as secondary to that of
economic policy while residualism in Korea’s social welfare system has been con-
solidated further.
Despite the perception that Korea lags far behind European welfare states, some
may argue that it has made increasing efforts to construct a social safety net while
simultaneously pursuing economic growth. Indeed, the Korean government intro-

duced a public assistance programme in the 1960s, as well as initiating industrial
accident compensation insurance and health insurance in the 1970s. During the
1980s, it implemented a national pension scheme and expanded the coverage of
health insurance. In the mid-1990s, it introduced employment insurance and
expanded the coverage of the national pension. Following the financial crisis, it
established the National Basic Livelihood Security System (NBLSS), and further
extended coverage under the four national social insurance programmes. However,
and despite the apparent stable development of a national social policy, this argu-
ment can be challenged. The evidence suggests that a national social policy in Korea
was developed mainly to induce rapid economic development and to compensate
the losers arising from this process. It was not developed to achieve egalitarian
fairness, as is arguably the case in such institutional welfare states as Sweden and
Finland. Korea’s health insurance, for example, was launched as a tool to increase
labour supply during the development period, and the national pension was imple-
mented originally to garner funds to assist the construction industry and small
businesses (Kim, Y. B., 2002). Such practices were never witnessed in conservative
Bismarckian welfare states such as Germany, which introduced its national social
insurance system as a means of soothing the predicted antipathy of the working 13
class (ibid). Furthermore, the welfare system in Korea was also used as a political
tool to secure the legitimacy of, and support for, military regimes in times past. As
a result, the system was organized without any foresight or future consideration,
rather than with clear long-term visions or objectives (Jung, 2002, p. 441; Kwon,
S. W., 2002). As evidence of this argument, we can look to the Fourth and the Fifth
Five-Year Economic Plans proposed by military regimes in search of legitimacy.
Both plans mentioned the importance of social policy, but ostensibly as means by
which to garner favourable support from the population only (Kwon, S. W., 2002).
Meanwhile, the military regimes actively protected special groups, such as profes-
sional soldiers, government employees and teachers, with a very generous welfare
system because they were viewed as indispensable for the management of the
country during the process of rapid industrialization. At the same time, however,
the working class was intentionally excluded from social welfare although their
contributions to Korean society were deemed significant (Jung, 2002, p. 441).
According to the power resources model (Korpi, 1980; 1983), the emergence and
development of welfare states require unified action by social democratic groups,
including trade unions and left-wing political parties, to exert pressure on capital.
However, in the context of Korea, the power of trade unions, which represent
Korea’s social democratic interests, has consistently been weakened by the Korean
government’s repressive labour policy. Major indices to gauge the power resources
of trade unions include degrees of union density and coverage. Significantly, when
these two factors are examined, one discovers that union density has decreased over
time in Korea, with the degree of union density in Korea in 2000 standing at only 11
per cent – rendering it 29th among 30 OECD countries (OECD, 2004b, p. 145). In
turn, the degree of union coverage in Korea currently stands at less than 20 per cent,
which is very low when compared to the 80 to 90 per cent found in European
countries (Freeman and Katz, 1995; Kim, Y. S., 2005, p. 67).
Low degrees of union density and coverage are closely associated with the fact
that trade unions in Korea are organized by individual companies, rather than by
individual industrial sectors. Due to this unique union structure, trade unions have
tended to stress only the interests of their members rather than the interests of the
entire workforce of the same profession, including non-standard workers or those
employed in small companies. This situation has impacted negatively on the labour
movement and solidarity among workers in Korea. As the number of non-standard
workers has increased rapidly, in particular as a direct result of the neo-liberal
labour policy of the Korean government since the financial crisis, the polarization of
labour between standard workers employed in large companies and those employed
in small companies, as well as between standard and non-standard workers, has
widened further in all respects — i.e. wages, welfare, job training, employment
security and working conditions.
14 In short, the political influence and power resources of trade unions in Korea
have been weakened over time. This has been as a result not only of the Korean
government’s repressive labour policy, but also of the extremely decentralized
labour-management relationship (due to union structure formations organized by
individual companies) and, in particular, the tacit support of the Korean govern-
ment for labour flexibility following the financial crisis. Together, these elements
have caused a further widening of labour polarization and have weakened solidarity.
Given this scenario, it is perhaps not surprising that the influence of trade unions
upon the development of the welfare state in Korea has been minimal.
Significantly, since the 1997 financial crisis, the Korean government has admin-
istered the restructuring of four sectors – finance, chaebols, public corporations and
labour — under its relief financing agreement with the International Monetary
Fund (IMF). As a result of implemented and proposed changes, the unique eco-
nomic structure of Korea, which has been the basis of the country’s rapid economic
growth — otherwise known as “Korea Inc.” — has rapidly dissolved. The traditional
economic structure has been replaced by what may be characterized as Western
European neo-liberalism, which emphasizes privatization, trade-investment-
finance liberalization, labour flexibility, conservative budget spending, anti-
inflation policy, welfare cutbacks and deregulation.
Most present-day political and economic decision-makers in Korea, together
with a large number of scholars and theorists, actively support such neo-liberal
restructuring under the theoretical veil of a “democratic market economy”. They
firmly believe that the realization of a neo-liberal economic system as rapidly and
effectively as possible, and at any price, will solve all the problems Korea has been
facing recently, such as economic downturn, high unemployment, and the worsen-
ing structure of redistribution (Choi, 2005, p. 464). Unfortunately, the neo-liberal
restructuring process has not produced the positive results that were expected by
many — i.e. optimized distribution of resources and economic growth through the
introduction of advanced management techniques, and improvements in trans-
parency and accountability of the domestic economic structure. The purported
economic benefits arising from the trickle-down effect that many proponents of
neo-liberal restructuring had initially advanced have not materialized. Instead, the
restructuring process has inflicted often-severe hardship on the majority of those in
the middle and working classes.
Despite growing awareness of the negative effects of neo-liberal restructuring
upon the lives of ordinary people, most political and economic policy makers in
Korea continue, without fail, to advocate neo-liberal restructuring. This suggests
that those individuals who are best positioned to influence Korean society continue
to value market efficiency and economic growth over social welfare, while they have
also yet to detach themselves from the authoritarian welfare model of the past.
Given this understanding, it seems inevitable that Korea’s future welfare policy will
progress within the framework of the free market and on the basis of the existing 15
residual welfare model.
Conclusion
The welfare regime in Korea today is best characterized as a residual model in which
the responsibility for the provision of social welfare is left mostly to the family and
the private market economy. Under this characterization, the welfare regime caters
largely only for those who are excluded from family and private market economy
support. As supportive evidence of this view, one may cite the underdeveloped
social insurance system, an antiquated social welfare service sector, and the
extremely low level of public social expenditure relative to that of all other OECD
countries. The fundamental reasons for this situation are closely associated with the
legacy of the “growth-first” ideology, which has remained dominant amongst the
majority of Korea’s political and economic decision-makers since the 1960s, as it is
with the process of neo-liberal restructuring adopted following the financial crisis
of 1997. In essence, the role of the social welfare system in Korea has essentially been
to complement market competition, with the aim of helping induce faster economic
growth. This is a characteristic not found in the institutional welfare framework, in
which social welfare programmes are introduced and implemented in order to
construct a universal and comprehensive welfare system. From the perspective of
the institutional welfare framework, welfare programmes are understood to serve
not only the poorer members of society but all citizens; they are a way to realize
egalitarian values. Moreover, the depiction of Korea’s welfare regime as inherently

residual has been reinforced by the actions of most political and economic decision-
makers in the country since the 1977 financial crisis. The growing pressures of
globalization and the country’s subsequent economic restructuring feed in to this as
well. Given all of these circumstances, one may well conclude that the future of
Korea’s welfare state looks far from promising.
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Revisiting the welfare state

system in the Republic of Korea

Korea Maritime University, Busan, Republic of Korea

Abstract The Republic of Korea’s welfare system has under-

Keywords welfare state, public expenditure, political aspect,

Many commentators have described the characteristics of the welfare system of

historical/structural or political/economic processes that helped to shape its unique

Typology of the welfare state in Korea

Table 1. Trends in Korea’s public social expenditure as a percentage of the total

19.9 20.2 24.5 26.7 27.9

Source: Ofﬁce of the President, Republic of Korea, 2007.

economies. The percentages of wage-earning Korean employees covered by social

Table 2. Public social expenditure in 30 OECD countries as a percentage of GDP,

Source: OECD, 2004a. NA: not available.

Political and economic factors instrumental to the

emphasized nationwide, most of Korea’s national resources were invested in the

simultaneously pursuing economic growth. Indeed, the Korean government intro-

egalitarian values. Moreover, the depiction of Korea’s welfare regime as inherently

Hong, T. H. 2002. “Lampert sahwoijeongcheck-ui baljeonjogeon-gwa kimdaejung jungboo

istics of the Kim Dae-Jung government’s welfare reform], in Hankookjungchihakhwoibo

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