OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

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Public Social Spending in Korea in the Context of Rapid Population Ageing

Faced with exceptionally rapid population ageing, Korea should address obstacles that lower fertility rates while encouraging higher labour force participation, particularly among women. While public social spending is currently very low, there is pressure for increased outlays on pensions, healthcare, long-term care and social assistance. The government should be cautious in expanding spending, taking into account the impact on economic growth. Outlays should be limited by shifting from direct provision of social services, notably childcare and long-term care, in favour of providing vouchers to consumers. Given the limited coverage of the public pension system, the new means-tested benefit for the elderly will be useful in reducing poverty. It is important to increase transparency about self-employed income to ensure fairness in the financing of social insurance systems, including the new long-term care insurance. The rise in inequality and relative poverty should be reversed by reducing labour market dualism.


Keywords: social spending, long-term care, Korea, population ageing, fertility, labour markets, Vision 2030 Plan, non-regular workers, healthcare, National Pension Scheme, pension reform, income inequality, relative poverty, labour force participation
JEL: I32: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Measurement and Analysis of Poverty; I38: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Welfare, Well-Being, and Poverty: Government Policy; Provision and Effects of Welfare Programs
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