Lee Jae-myung's 'Rural Basic Income' Experiment Is Coming... Basic Income Gains Attention Again

Gyeonggi-do to Pay 150,000 KRW Monthly to Over 4,000 People for Up to 5 Years
Academia: "Massive Financial Burden, Funding Plans Must Precede"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] As income inequality deepens due to the prolonged COVID-19 pandemic, 'basic income' is emerging as a key topic in welfare policy. In particular, with the ordinance related to Lee Jae-myung's rural basic income set to pass the provincial council in April, debates over basic income are expected to intensify.

According to Gyeonggi Province on the 28th, Gyeonggi Province will begin a social experiment on rural basic income as early as the second half of this year. A Gyeonggi Province official stated, "Once the ordinance is passed, we will enable the payment of basic income," adding, "The period is expected to be between 3 and 5 years."

Lee Jae-myung to provide 150,000 KRW monthly basic income to about 4,000 residents in rural Gyeonggi Province

Gyeonggi Province plans to provide a monthly basic income of 150,000 KRW for up to 5 years to about 4,000 residents of one rural township facing crises such as population decline, and observe how residents' lives change. The budget for the basic income experiment will be shared with Gyeonggi Province covering 70% and the selected city or county covering 30%.

It is necessary to examine the effectiveness of new policy alternatives to address income inequality. In fact, conducting the experiment on all residents in one area without selecting unemployed or impoverished individuals is meaningful in itself.

Income inequality has actually worsened due to the prolonged COVID-19 pandemic. According to the '2020 4th Quarter Household Trends Survey' previously released by Statistics Korea, the labor income of the first quintile (bottom 20%) was 596,000 KRW, a 13.2% decrease from the previous year, while the fifth quintile's income increased to 7,214,000 KRW.

Academia and fiscal authorities: Limited effectiveness and insufficient funding... Difficult to implement alongside existing welfare systems

However, academia opposes adding basic income to the existing welfare system, citing limited effectiveness and insufficient funding.

Professor Hong Woo-hyung of Hansung University’s Department of Economics said, "The cost-benefit ratio is too low," adding, "Since consumption does not increase due to money changing hands, there is essentially no effect."

Professor Sung Tae-yoon of Yonsei University’s Department of Economics stated, "It is difficult to secure funding without the three major taxes: income tax, value-added tax, and corporate tax," and added, "If a small amount is given, the economic effect is not significant, so the effect will be even smaller for the middle class and above." He emphasized that massive fiscal resources are required to provide basic income, and it is practically impossible without tax increases.

Professor Kim Sang-bong of Hansung University’s Department of Economics also expressed concerns, saying, "In Alaska’s case, basic income funding was secured through fixed income," and warned, "Providing basic income may reduce work motivation and cause side effects that could lead to a downward leveling of society as a whole." In fact, the U.S. state of Alaska has maintained this system for 40 years based on the definite wealth of oil resources and has a small population of only 700,000.

Meanwhile, the Ministry of Economy and Finance, the fiscal authority, also agrees that introducing 'basic income' under the current welfare system is difficult. They argue that basic income’s indiscriminate nature could further deepen polarization. Additionally, there are concerns that providing basic income while maintaining existing welfare programs with limited resources could increase national debt. According to the 'National Fiscal Operation Plan: Fiscal Volume Effects and Management Measures' submitted to the National Assembly along with the first supplementary budget this year, the national debt is estimated at 965.9 trillion KRW this year.

This content was produced with the assistance of AI translation services.