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Universal Welfare System

Posted October. 22, 2010 11:53,   


Following its proposal to provide free school meals, the main opposition Democratic Party added “universal welfare” to its party constitution. The Seoul Metropolitan Council, which is dominated by party members, also said it will create a consultative body for universal welfare for providing it to all citizens regardless of income. Free school meals and childcare are typical examples of universal welfare. An alternative is selective welfare, which is provided to the most needy.

Prime Minister Kim Hwang-sik said Tuesday, “I am opposed to a universal welfare system in which the poor and rich alike receive benefits. A national disaster could ensue if the law, welfare and politics are mixed together.” As examples of welfare gone wrong, Kim cited free school lunches and free subway passes for the elderly. Though highly controversial, his comments clearly indicate his opposition to unconditional welfare populism and support for selective welfare.

Providing free meals to rich students is certainly excessive considering the huge demand for other welfare services for those more needy. Many European countries with universal welfare systems have a tax-to-GDP ratio of 40-50 percent. Korea’s ratio is 19.3 percent, meaning the country would have to raise taxes 200 to 250 percent to introduce the European model. If implemented, however, this will incite huge opposition from the Korean public over the heavy tax burden.

European countries are seeking to change universal welfare due to high fiscal deficits resulting from the global economic crisis. After taking office, British Prime Minister David Cameron decided to abolish child benefits for individuals earning more than 44,000 pounds (70,000 U.S. dollars) a year from 2013. Though these people account for just 15 percent of British households, the political stance of the Conservative Party-led administration has weakened considerably due to huge resistance.

The Korean government, political parties and the public together should rationally judge which welfare system to adopt considering the country’s condition and global trends. A populist tactic by one political party leads to bigger welfare policies by another. Such competitive pledges will burden the public. Lessons can be learned from France, which is in chaos due to a dispute over pension reforms. It is difficult to turn back once a welfare policy is implemented. Universal welfare can lead to serious moral hazard from free riders and could even regress because of a growing number of lazy free riders. A nation should build wealth through competition and production. Politicians should also assume more responsibility to relieve future generations of pain.