Is the Yoon Administration's 'Welfare Budget' for the Underprivileged Truly Caring?..."It Just Increased, Not Expanded"

Increase of 10.9 Trillion Won in Social Welfare Budget is a 'Fact'
Significant Slowdown in Welfare Budget Growth Compared to Past Trends
Doubts on Welfare Commitment Considering It Is the New Government's First Budget
Largest Cuts Found in Welfare Sector Upon Detailed Project Analysis
Most of the Increased Budget Taken by Automatic Increases in Public and Basic Pensions
Claimed Increase in Basic Median Income Merely Applies 2020 Calculation Formula

[Asia Economy Reporter Naju-seok] The controversy over the truth of the Yoon Suk-yeol administration's welfare budget for next year continues. While the opposition party points to it as a 'heartless budget,' the ruling party argues it is a 'kind budget.' We examined the direction of this budget, which will serve as a compass for the current administration's welfare policy over the next five years.

On the 8th, Sung Il-jong, Policy Committee Chairman of the People Power Party, criticized at a 'Press Conference on Budget Review Direction' that "the total social welfare budget for the livelihood and vulnerable under the Yoon Suk-yeol government increased by 10.9 trillion won compared to this year, but the Democratic Party continues false agitation that the budget for specific projects has been reduced." The next day, on the 9th, members of the National Assembly's Health and Welfare Committee from the Democratic Party and the Justice Party, together with the People's Solidarity for Participatory Democracy, issued a statement at the National Assembly Communication Hall condemning the 'reduction of the Yoon Suk-yeol government's welfare budget.'

Earlier, on September 2, immediately after the budget was submitted to the National Assembly, Song Eon-seok, Senior Deputy Floor Leader of the People Power Party, appeared on MBC Radio's 'Kim Jong-bae's Focus' and countered the criticism of the next year's welfare budget as a 'heartless budget' by explaining, "I think it is a kind budget." President Yoon Suk-yeol also stated in his National Assembly policy speech on the 25th of last month, "Protecting socially vulnerable groups who suffer greater hardships during economic difficulties is a fundamental duty of the state," and explained, "The government pursues 'welfare for the vulnerable' by supporting low-income and socially vulnerable groups more robustly while promoting fiscal soundness."

[Image source=Yonhap News]

What is the nature of next year's welfare budget?

To clarify the issues surrounding the welfare budget controversy, we will examine the actual budget size, comparisons with past budgets, and the characteristics of the budget proposal.

1) Changes in the Size of the Social Welfare Budget

Based on the total amount, it is clear that the welfare budget has increased, as the ruling party explains. Welfare-related budgets dispersed across ministries are consolidated and counted as the 'Health, Welfare, and Employment Budget.' Among the 15 categories classified in this budget, excluding 'health budgets' such as healthcare, health insurance, and food and drug safety, 12 categories including basic livelihood security, support for vulnerable groups (disabled), public pensions, veterans affairs, housing, general social welfare, child care, elderly, women, family and youth, employment, labor, general employment and labor, healthcare, health insurance, and food and drug safety are classified as 'social welfare budgets.'

According to the analysis by the National Budget Research Institute, comparing next year's budget proposal with last year's main budget, out of 869 welfare-related projects, 322 projects were cut by 13.2 trillion won. The projects with increased budgets were 414, totaling 24.1 trillion won. Considering both cuts and increases, it is clear that the welfare-related budget increased by 10.9 trillion won.

Looking at detailed classifications, the employment and housing sectors were cut by 2.3 trillion won and 2.4 trillion won respectively. On the other hand, public pensions increased by 8.3 trillion won, the elderly sector by 2.7 trillion won, basic livelihood security by 2.4 trillion won, and labor by 700 billion won.

Although the social welfare budget increased overall, compared to last year's main budget, cuts were made in the largest number of sectors. The budget changes by project were adjusted significantly. Following social welfare, the industrial, small and medium enterprises, and energy sectors saw cuts of 8 trillion won, and defense 6 trillion won.

Comparing next year's budget proposal with this year's budget, the largest cut in the social welfare sector was in the rental housing budget. Most rental housing-related projects (multi-family purchase rental (loan), jeonse rental (loan), happy housing (loan), multi-family purchase rental investment projects, etc.) were cut, but only the integrated public rental investment project and integrated public rental loan project increased by 200 billion won each. As a result, the total rental housing-related budget decreased by 5.6 trillion won. Lee Jae-myung, leader of the Democratic Party, criticized immediately after the budget was submitted to the government, saying, "I truly felt it was heartless," and "I cannot understand how the budget was cut to an unimaginable extent rather than increased for the unfortunate low-income people suffering from housing difficulties."

Lee Sang-min, senior researcher at the National Budget Research Institute, said, "The ruling party emphasizes the overall welfare budget increase of 10.9 trillion won and calls it 'kind,' while the opposition points to the 13.2 trillion won cut and calls it 'heartless.' The important point is to see where and how the increases occurred."

2) Proportion of the Total Budget

Next year's total budget is 639 trillion won, of which the social welfare budget is 205.8 trillion won. The proportion of social welfare in this year's main budget was 32.1%, while next year's budget increased to 32.2%. The share of social welfare in the total budget has increased. The budget growth rate was 31.4 trillion won (5.2%) overall, while the social welfare budget increased by 10.9 trillion won (5.6%). The welfare budget growth rate is 0.4 percentage points higher than the overall budget growth rate.

However, when compared to past trends, it is possible to see whether the social welfare budget was strengthened in this government's budget.

Analyzing the main budget growth rate and social welfare budget from 2012 to 2022, the social welfare budget growth rate was lower than the main budget growth rate only in 2013 and 2022. During this period, the main budget increased by an average of 6.4%, while the social welfare budget increased by 8.6 percentage points. The social welfare budget is rising 2.2 percentage points faster. Due to the expansion of welfare demand and aging population, the welfare budget growth rate exceeded the overall budget growth rate.

In light of this, next year's budget proposal shows a significant slowdown in the increase of the social welfare budget's share.

As a result, although the government's fiscal tightening policy lowered the overall budget growth rate compared to previous years, the slowdown in welfare budget growth is even more pronounced.

Another point to note is that next year's budget is the first budget of the Yoon Suk-yeol administration. In the cases of the Park Geun-hye and Moon Jae-in administrations, welfare budgets rose in the early years of their terms to fulfill campaign promises but slowed down in the later years. For example, in the first budget of the Park Geun-hye administration in 2014, the overall budget increased by 4.0%, while the social welfare budget increased by 9.6%. Later, the welfare budget dropped to 5.5% in the final year. Similarly, the Moon Jae-in administration's first budget in 2018 saw the overall budget increase by 7.1%, and the social welfare budget by 12.1%. Subsequently, the welfare budget declined to 5.4%, lower than the overall budget growth of 8.9%. Considering the characteristic of past administrations actively strengthening welfare in the early years to fulfill promises, the first budget of the Yoon Suk-yeol administration does not appear to strongly support the social welfare budget.

Choi Hyun-soo, research fellow at the Korea Institute for Health and Social Affairs, said, "When a government is inaugurated, the first budget usually actively includes parts related to national tasks, but it is difficult to find such projects in this budget," adding, "(Next year's budget) mostly consists of naturally increased parts."

3) Characteristics of the Budget Proposal

As many social welfare-related budget projects increased and decreased, we examined major increased projects to understand the specific nature of the budget proposal.

The largest increase in this social welfare budget is related to public pensions. The public pension budget increases from 63 trillion won this year to 71.2 trillion won next year, an increase of 8.3 trillion won. This budget increase is naturally caused by the increase in recipients of public pensions (National Pension, Government Employees Pension, Military Pension).

The Ministry of Health and Welfare's elderly-related budget also increases by 2.3 trillion won next year, much of which corresponds to the increase in the basic pension. The basic pension rises from 16.3 trillion won this year to 18.5 trillion won. The number of basic pension recipients increased from 6.31 million to 6.65 million, and the standard pension amount was raised from 301,500 won to 321,950 won considering inflation. Thus, 94.9% of the increase in the elderly-related budget is due to the basic pension increase.

This 4.7% increase in the basic pension is according to the Basic Pension Act, which stipulates that the payment amount be raised annually reflecting inflation. During the presidential election period, President Yoon promised to gradually raise the basic pension to 400,000 won, but this increase was decided independently of his campaign pledge, based on existing law.

With the increase in public pensions and basic pensions alone, the entire increase in next year's social welfare budget is accounted for. All of these increases are mandatory under existing laws, regardless of government will.

Excluding these mandatory expenditures, the 'welfare for the vulnerable' emphasized in next year's budget is the 5.47% increase in the standard median income. The standard median income, which determines eligibility and benefits for livelihood benefits (below 30% of the standard median income) and medical benefits (below 40%), has risen, expanding the number of eligible recipients. The increase in the standard median income is also the most emphasized part of the government's 'welfare for the vulnerable' in next year's budget. President Yoon also explained in his policy speech, "We pursue welfare for the vulnerable," and "By adjusting the standard median income to the largest extent ever, we increased the maximum livelihood benefit payment for a four-person household, reflecting 18.7 trillion won in basic livelihood security support."

However, this increase in the standard median income is not a legal obligation but is difficult to interpret solely as a government policy will. It is neither more nor less than the existing agreement to raise the standard median income.

The standard median income, which is key to determining eligibility for the basic livelihood security system, has been criticized for being lower than the official government statistics from the Household Finance and Welfare Survey. Therefore, since 2020, the government has decided to gradually adjust the standard median income. The 5.47% increase this time applies the formula based on 2020. The Moon Jae-in administration did not apply this formula consistently, so this increase is the largest ever. However, recent inflation strongly influenced this increase. Even with the formula-based increase, there are criticisms that it does not guarantee real purchasing power.

Oh Geon-ho, policy committee member of the Creating a Welfare State, pointed out at the policy forum 'How Should the National Budget Change Amid Economic and Social Crises' hosted by the Inclusive Fiscal Forum on the 9th, "The increase rate was determined according to a roadmap to gradually adjust the gap because the standard median income is lower than the official Household Finance and Welfare Survey median income," adding, "Next year's increase rate is the largest since the introduction of the standard median income system in 2015, but considering recent inflation, it is insufficient to secure the real purchasing power of existing welfare benefits."

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