Transcript 슬라이드 제목 없음 - World Bank

The Role of the Fiscal Policy
in Poverty Reduction
2003. 10. 9
Youngsun Koh
Korea Development Institute
Trends in income inequality
Korea has long been known as a country that achieved
equitable income distribution together with rapid economic
growth.
Gini coefficients
0.35
Inequality of income
0.30
0.25
Inequality of consumption
0.20
0.15
79
81
83
85
87
89
91
93
95
97
99
01
Source: Hyun (2003).
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Contributing factors : Economic growth
Rapid economic growth itself contributed to the
reduction in poverty by providing a wide range of
job opportunities.
Labor force participation and unemployment
8
(%)
(%)
Participation ratio (right scale)
7
64
62
6
60
5
4
58
3
56
2
Unemployment rate (left scale)
54
1
0
52
80
82
84
86
88
90
92
94
96
98
00
02
Source: National Statistical Office.
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Contributing factors : Stable macroeconomic environment
Low and stable inflation since the early 1980s, helped in
part by sound fiscal management, fostered private savings
and the accumulation of wealth among the general public.
Rate of Inflation (CPI)
30
(%)
Savings rate
45
(%)
Total
40
35
20
30
Private
25
20
10
15
Household
10
5
0
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02
Source: National Statistical Office.
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02
Source: Bank of Korea
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Contributing factors: Demands for education
Strong desire for educational attainment led to
a general improvement in the labor force quality,
which in turn moderated wage differentials among workers.
Enrollment rates
Ratio of college-graduates
(%)
(%, by age group, ’01)
Elementary Middle
’60
’70
’80
’90
’00
’02
99.8
100.7
102.9
101.7
98.7
98.5
33.8
51.2
95.1
98.2
99.5
98.5
High
College
19.3
28.1
63.5
88.0
95.6
94.0
5.0
8.7
15.9
35.2
79.4
87.0
Source: Ministry of Education and Human Resources Development.
24-64
U.S
Japan
Germany
France
Italy
U.K
Korea
37
34
23
23
10
26
24
24-34
39
47
22
35
12
30
40
Source: OECD, Education at a Glance, 2002.
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Contributing factors : Educational spending
The Korean government has made great efforts
to meet the rising demand for education
by spending a large share of its resources on this area.
Expenditure on education
(% of GDP, ’99)
(% of the central government spending)
Public Private Total
U.S
Japan
Germany
France
Italy
U.K
Korea
4.9
3.5
4.3
5.8
4.4
4.4
4.1
1.6
1.1
1.2
0.4
0.4
0.7
2.7
Source: OECD, Education at a Glance, 2002.
3.9
4.7
5.6
6.2
4.8
5.2
6.8
Education Defense Welfare Economic
Affairs
’70
16.7
22.7
4.9
27.4
’80
14.6
30.6
5.7
26.0
’85 16.6
26.6
5.2
21.9
’90
17.0
20.0
8.1
20.4
’95
18.0
15.7
9.0
24.9
’00
15.3
11.4
15.3
25.2
Source: Ministry of Finance and Economy.
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Contributing factors : Social insurance programs
All social insurance programs have now been fully
extended to the target populations by law, but the actual
participation is usually below the 100% level.
Social insurance programs
Starting year Full extension
Insured
(thousand)
Workers’ Compensation
1964
2000
10,571
National Health Insurance
1977
1989
46,659
National Pension
1988
1999
16,499
Employment Insurance
1995
1998
7,171
Note: In addition to the National Pension, we also have separate occupational pension programs for civil servants (931,000), military
personnel, and private school teachers (221,000).
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Contributing factors : Public assistance and welfare services
The government offers public assistance to the very poor
who cannot participate in social insurance programs. It
also provides welfare services for the disabled, seniors,
and other underprivileged groups.
National Basic Livelihood Protection Program
 Target population
- Families with income below the specified minimum living costs
- Monthly minimum for a 4-member family (’03): 850 USD
- Around 3% of the total population is currently covered with NBLP.
 Types of assistance
- Income support, housing and educational allowance, medical aid, etc.
- The amount of monthly income support corresponds to the difference
between the beneficiary’s income and the minimum living costs.
 Budget for ’03 : 2.9 billion USD
- Income support 1.1 billion USD, medical aid 1.5 billion USD.
-8-
w
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N de
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w (
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The impact of the recent economic crisis
The recent economic crisis substantially increased
income inequality in Korea.
International comparison of Gini coefficients
0.5
0.4
0.3
0.2
0.1
0.0
Source: Yoo (2003).
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Inequality of market income
But in terms of market income (before the intervention of
the tax and transfer system), inequality is still low in Korea.
 Disposable income = market income - taxes paid + transfers received
Gini coefficients of market and disposable income
Market income
Disposable income
0.5
0.4
0.3
0.2
0.1
Source: Yoo (2003).
Ir
el
an
d
(1
98
7)
7)
98
6)
98
w
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(1
(1
4)
98
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98
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4
82
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98
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98
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98
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98
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98
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(1
97
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w
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(1
99
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0.0
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Limited role of the tax and transfer system
The very small difference in Gini coefficients between
market and disposable income indicates the rather limited
role of the tax and transfer system in Korea in general and
the immaturity of the pension system in particular.
Welfare expenditure and tax revenue
(% of GDP)
50
Welfare expenditure
Tax revenue
40
30
20
10
I
h e t al
rl y
an
d
F s
ra
n
F ce
in
la
S nd
w
ed
en
N
G
et
a
e r da
m
an
y
.K
an
U
C
p
u s an
tr
al
Ir ia
el
an
d
S
S
w p
it ai
ze n
rl
an
d
A
U
.S
Ja
K
or
ea
0
Note: The data for Korea refer to 1999 while others refer to 1995. The tax revenue includes social security contributions.
Source: Moon (2000); OECD, OECD Revenue Statistics, (2002).
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Expected increase in welfare expenditure
Even under the current schemes, however, the welfare
expenditure is expected to grow rapidly in the future
with the aging population.
Projected welfare expenditure
(% of GDP)
25
Aging population
40
(%)
The elderly as a proportion of the total population
35
20
The elderly as a proportion of those aged 15-64
30
25
15
20
10
15
10
5
5
0
0
2000
2005
Source: Moon (2000).
2010
2015
2020
2025
2030
2000
2005
2010
2015
2020
Note: The elderly refers to those aged 65 or more.
Source: National Statistical Office.
2025
2030
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Increasing tax burden and rising inequality
The increasing expenditure on welfare programs will be
accompanied by an increasing tax burden, implying a
bigger role of the tax and transfer system in reducing
the income inequality.
At the same time, the inequality of market income is set
to rise due to the skill-biased technological progress,
the globalization of the Korean economy, the growing
number of the elderly living alone, and the increase in
structural unemployment that usually follows the increase
in tax burden.
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Less focus on inequality
For these reasons, it appears inappropriate to seek at this
moment a drastic measure to reduce the income inequality,
which is likely to prove to be ineffective and/or accelerate
the growth in welfare expenditure.
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N w y 9
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And greater focus on poverty
Instead, the efforts should be focused on reducing the
poverty at the bottom of the income ladder.
Relative poverty in population
18
16
14
12
10
8
6
4
2
0
(%)
Note: Relative poverty is defined as those with income below 40% of the median income of the total population.
Source: Yoo (2003).
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Two-pronged strategy to fight the poverty
 Expanding the job opportunities by promoting the
vitality of the market economy and by increasing the
labor market flexibility; and
 Targeting welfare programs at the very poor.
For example, rather than financing the enormous deficit
in National Health Insurance with tax money, the government
should raise the insurance premium more rapidly and use
the saved tax money on medical aid for the poor.
Rather than extending free education to all middle-school students,
loan and subsidy programs should be expanded for college students.
Housing policy should be similarly revamped and targeted at the poor.
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