Korea has made tremendous economic progress over the past decades on the back of rapid growth and a well educated and skilled population. Nevertheless, income inequality has widened more recently, calling attention to the policies that can be put in place to strengthen social cohesion in pursuit of stronger, more inclusive growth in the years to come.
Acronyms and abbreviations
Korea’s population, one of the youngest in the OECD at present, will be the second oldest by 2050. During this transition, public social spending will need to increase significantly while economic growth slows.
A policy toolkit for growth and social cohesion in Korea
The economic progress achieved by Korea over the past four decades has been among the most rapid and sustained ever seen, both in terms of the pace of convergence of per-capita income towards the OECD average and the extent and depth of the societal transformations that economic change has entailed (Figure 0.1).
Overview: Why is social cohesion an urgent issue in Korea?
This chapter examines the challenge of sustaining economic growth while encouraging social cohesion. A number of factors add to the challenge of fostering social cohesion; rapid population ageing; polarisation of the labour market between high-paid regular workers and lower-paid non-regular workers; low productivity and wages in the service sector and in small firms; and concern about the potential cost of economic rapprochement with North Korea. It is important, therefore, to advance gradually and cautiously in expanding social welfare programmes. In the face of such spending pressures, policies to sustain output growth, notably by boosting the labour force participation rate and increasing labour productivity, particularly in the service sector, are a top priority. In addition, rising public spending should be financed through tax increases designed to limit the negative impact on output growth. This suggests relying primarily on the value-added tax and environmental taxes.
Income distribution and poverty among the working-age population and implications for social welfare policies
This chapter looks at the implications of social welfare policies in income distribution and poverty among the working-age population. Korea has an institutional framework capable of providing an effective safety net for the working-age population. Yet, Korea’s poverty rate is high by international standards and its tax/benefit system is one of the least effective among OECD countries in reducing income inequality and in alleviating poverty. To strengthen social cohesion and have a significant effect on poverty alleviation, the challenge for policy reform will be to extend the reach of the three main pillars of the safety net and take measures to improve the accessibility for those whose circumstances result in family income below the poverty threshold; strengthening the employment orientation of the support provided to those who have work capacity; and undertaking systematic and regular monitoring and evaluation of programmes.
Policies to tackle labour market duality in Korea
This chapter examines one of the key issues in the Korean policy debates about how to stem the rise in income inequalty: labour market duality. In the context of rapid population ageing and an increasingly difficult school-to-work transition for many youth, strong dualism also threatens to lower the growth potential of the economy. Against this background, the first goal of this chapter is to provide an empirical overview of labour market dualism in Korea and compare the main patterns which emerge with those observed in other OECD countries. This analysis confirms that dualism is unusually strong in Korean and is an important source of earnings inequality and the highest rate of labour turnover in the OECD area. The chapter also identifies effective policy strategies for reducing labour market duality. It argues that well designed policies can reduce the most harmful aspects of duality and thus contribute to stronger and more equitable growth in Korea.
Combined early childhood education and care measures to ensure social cohesion
This chapter assesses the current early childhood education and care (ECEC) programmes in Korea. Korea should carefully consider the priorities among its ECEC policy goals: i) ensuring equity for children in disadvantaged families; ii) raising maternal labour force participation, as well as work-life balance, especially in a manner more equitable for women; iii) boosting the fertility rate, and iv) regarding ECEC as public responsibility. To meet these goals, Korea should first and foremost ease the financial burden on parents for having children and for meeting the associated education cost. Channelling more public spending is required. ECEC is crucial for improving the educational development of children, but its effects will depend on the quality of provision. Good quality and affordable ECEC services can influence parents’ decisions, such as whether to go back to work after starting a family or to have more children.
Moving from hospitals to primary care for chronic diseases
This chapter provides policy recommendations to help develop stronger primary care in Korea, by suggesting a new type of service delivery – multi-specialty group practices (polyclinics). It examines the rapid growth of health care costs, fuelled by payments that encourage the delivery of high volumes and complex services. Hospitals dominate Korea’s health system, which also has one of the highest of avoidable hospital admissions in the OECD. At a time when more Koreans are facing health problems as they get older, primary care services that help people manage health conditions like diabetes and heart diseases are underdelivered. Improving access to high quality primary care services can decrease health inequalities and contribute to social cohesion.
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