'Minimum Income Guarantee System' Adds to Welfare Policy Controversy in Presidential Race

Income Security System for Below 40% Median Income
Interest Raised After Sojusung Special Committee Discussion

Closure of Small Businesses. (Photo by Asia Economy DB)

[Sejong=Asia Economy Reporter Moon Chaeseok] As the system guaranteeing minimum income for households earning 40% or less of the median income is being discussed mainly among welfare scholars following basic income and wealth income tax, it is attracting attention ahead of next year’s presidential election. Since it is based on the principle of 'selective payment,' it differs from basic income, and the scope of reform is not as extensive as the 'wealth income tax (NIT),' which can only be realized by restructuring welfare systems focused on 'livelihood benefits + Earned Income Tax Credit (EITC),' making it a relatively realistic alternative. However, criticism arises as this system also lacks concrete measures for securing funding.

According to the Special Committee on Income-Led Growth on the 23rd, at the recent discussion forum on 'Exploring Innovation Plans for the Income Security System,' Oh Geon-ho, Policy Committee Chair of the Welfare State We Make, mentioned the 'Minimum Income Guarantee System,' explaining that unlike NIT, it can strengthen support for lower-income groups without integrating existing welfare systems such as livelihood benefits and EITC, by maintaining the current system framework.

The core of the system is to integrate lower-income income security systems into a 'minimum income guarantee' to reduce blind spots in support for lower-income groups. While maintaining the existing framework of 'livelihood benefits + EITC support,' the basic support unit would be increased from the current livelihood benefit threshold of '30% or less of median income (550,000 KRW per month for a single-person household)' to '40% or less (720,000 KRW per month).'

The income replacement rate would also be significantly raised from the current 30% of livelihood benefits to 100%. For example, a single-person household with a monthly income of 500,000 KRW falls short of '40% of median income' (720,000 KRW per month) by 220,000 KRW, so applying a 100% replacement rate, the government would compensate the 220,000 KRW. This is more than 200,000 KRW higher than the current support amount of 15,000 KRW. Essentially, this means full compensation for lower-income groups.

However, this system also faces the problem of unclear funding measures. While NIT presents specific numbers of recipients (25.4 million for full and partial payments) and estimated funding amounts (172.7 trillion KRW if the current income tax system is maintained, 133.3 trillion KRW if personal and earned income deductions are abolished), the Minimum Income Guarantee System does not.

Chairman Oh stated, "Regardless of changes in revenue conditions, the '100 (replacement rate) - 40 (recipient threshold)' principle must be maintained," adding, "To accurately assess income, integration of national tax administration and welfare administration is necessary, and for this, the role of tax authorities should be expanded."

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