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Basic Income: Can It Become Our New Social Welfare System?

Last year, Korea’s 19th presidential election candidate Lee Jae-Meong made a promise which brought about a big dispute. The promise was about basic income. In fact, basic income is a hot issue not only in Korea, but in many other countries, especially Finland. From this year, Finland has declared for the _rst time that the Finnish government will pay \700 thousand to 2000 randomly selected people. Besides Finland, there are other countries applying a social welfare system similar to basic income. The Sungkyun Times (SKT) will now introduce information about basic income, and will provide readers opinions regarding basic income.

What is Basic Income?

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Basic income is an income which is given to every person by the government regardless of their age, sex, and holding assets. All members of society will receive an individual basic income, in cash, monthly. The government will apply the current inflation to the basic income to guarantee their basic living. This shows the universal and unconditional nature of the basic income. Basic income is part of a social welfare system aiming to share its benefits which have been given unequally because of the environmental and social phenomenon irrelevant to personal will. The basic income system is different from any existing social welfare system. Even though basic pension and youth compensation can be recognized as extended forms of the basic income, they must meet certain requirements, unlike basic income. If Seoul city declares that they will pay all Seoul citizens \1 million every month without any conditions, this could be an example of the basic income. In contrast, if Seoul city pays \1 million only to people aged 60 and over, this cannot be an example of basic income. The idea of the basic income is that every person whether rich or poor, should receive the income equally, and pay tax proportionately to their income. In other words, receive equally, and pay tax reasonably. The concept of the basic income _rst appeared in the 16th century through Thomas Paine, and John Stuart Mill. Recently basic income has reappeared because of the Forth Industrial Revolution which is a new industrial era that already exists around us in the form of factory automation. Currently, an almost perfectly automated system is being applied and lots of people are worried that they might lose their jobs.

chosunbiz.com

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Therefore, voices supporting basic income are rising up. There are also lots of opinions about basic income in Korea. Recently, a candidate of the 19th presidential election Lee Jae-Meong spoke about basic income, and attention to basic income has risen. Before Lee’s promise, basic income existed as a form of youth compensation in Korea. Seoul city is enforcing youth compensation to enhance the unemployment rate, and lighten the burden of looking for a job. Youth compensation is given to unemployed people who are aged between 20s and 30s. The Ministry of Health and Welfare announced that 73% of people who received youth compensation have answered that they were satis_ed with the payments.

Advantages of Basic Income

Guaranteeing Livelihood for Citizens

The United States (US) government has predicted that because of the digital revolution, 83% of jobs which are paid $20 per hour, and 31% of jobs which are paid $40 per hour, will disappear in the future. Nowadays, because of technology development cost of labor is decreasing, and some scholars who are supporting the basic income are saying that the basic income is now essential to guarantee workers’ livelihoods. Moreover, by receiving basic income and guaranteeing people’s livelihoods, the government can enhance freedom and equality in a democratic society. When all citizens are guaranteed their living regardless of their employment status or environmental factors, people will pay more attention to politics, and participate in the community. Activation of Economy

Basic income can help arouse the activation of our economy. By giving people a basic income; money will be released into the market. People will spend, make a deposit, and repay their debts. Those economic activities will lead to a more vitalized consumption. Supporters of the basic income argue that when consumption makes revolution, consequently economy will be activated. On the other hand, opponents of the basic income insist that basic income might lower people’s will to get a job, and work hard. Nations where the social welfare system is similar to where the basic income is being applied; however, investigated into people’s will to work hard when they receive basic income, and they obtained an opposite result. A lot of people answered that they will, and also want to work even if they receive basic income. According to the research center Switzerland Demoskop, 90% of respondents answered that they would continue to work or look for a job even if they received the basic income.

Reduction of Management Expense All social welfare system expenses are comprised of two parts; expenses that go directly to the beneficiaries of welfare, and expenses which are administrative expenses. Administrative expenses include expenses used to make standards, about who manages bene_ciaries, and distribute assets. Like a basic pension, a selective welfare system needs more assets than a universal welfare system. Moreover, a selective welfare system has a vague standard for selecting its subjects. Therefore, a universal welfare system, basic income appeared as a solution. A free meal plan is an example of this. Providing a free meal plan to poorer children would cost more than its original price. Therefore, if the basic income is given to every citizen, we can combine or even abolish existing selective social welfare systems. By doing this, management expenses can be reduced.

Disadvantages of Basic Income

Financial Constraint

As for the US, paying every citizen their average minimum cost of living would cost almost $3.8 trillion which is equal to one year of assets of the federal government. Even though the US can secure budget when they abolish some of the existing social safety nets, they still need to _nd other ways to secure more budgets. Korea also needs more budget to enforce the basic income system. If Korea were to give every person the basic income, then a budget of more than the 2016 total expenditure of government money would be needed. To lower the _nancial burden, some scholars are claiming that reducing the unnecessary waste of budgets, combining social welfare systems, and increasing tax are needed.

Increase in Tax

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Having no definite solution to securing capital, an increase in tax is necessary. Even if the government removes some of the current social welfare systems, and uses that capital to cover the needed assets of the basic income, the government will still suffer from a _nancial shortage. According to the amended income tax in 2017, Koreans have to pay 22% of income tax in average. The Economist analyzed that if the Korean government pays one million won basic income to every single Korean citizen each month, then the government must charge about 20% more tax of the current GDP. At present, people who earn more are paying more taxes than those who do not. Surprisingly, people paying more tax are more dissatisfied because they do not know where their paid tax is being used, not just because they pay more. If the government is planning to raise tax, it is important to arrange a countermeasure to reinforce the transparency of using taxes.

Other Opinions

Some people predict that the people’s will to work hard and find new jobs will decline because of the basic income. Basic income can be accepted as a concept of monthly salary, so there are possibilities that people might feel they do not have any reason to work hard. Furthermore, a breakup of the connection between labor and income can happen. In reality, income comes from labor, but if basic income is given then income does not need to come from labor. Disconnection of labor and income might bring serious decomposition of the market. There are also problems in that the basic income system’s effects are uncertain. People who have received basic income might use it for _nding a job or for living expenses; however, they might use it for unhealthy consumption like drugs and drinking. Whether the basic income can be a solution to an existing social welfare system is also another concern regarding the basic income. There are several problems but we have been doing _ne to some degree with the existing system. If the basic income system, however, becomes a new system to replace the old one, then more problems might occur.

Basic Income in Other Countries

Switzerland

Switzerland’s National Referendum/ yonhapnews.co.kr

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In March 5th, 2016, Switzerland carried out a referendum as to whether they should practice the basic income system. Switzerland’s basic income system will give 2500 francs which is almost \3 million to adults, and 625 francs, or \700,000, to children every month. From 2012, the rate agreeing with practicing basic income has increased. A national petition about introducing the basic income has been running since 2012, and in six months, those who agree with the basic income has increased from 40,000 to 130,000. In addition, there were slogans agreeing with the referendum such as “If your income is guaranteed, you can do everything”, or “Because of basic income I choose to remain living”. Unfortunately, the plebiscite was rejected for reasons of an objection to the existing social welfare system, _nancial burden, and the possibility of an immigration increase. Switzerland’s referendum was rejected; however, it was a first act of commercializing basic income which was only existing in concept. Moreover, it gave a shock to the world, and helped to increase public interest in the basic income.

Finland

Finland has declared that the government will pay \700,000 to 2000 citizens who are randomly selected every month. This became a hot issue throughout the world because it was the first attempt to commercialize the basic income. It is still at an experimental stage, but the government will practice the basic income system for 2 years starting from this year. People who receive the basic income have no duty to inform where or how they use their money to the government, and even if a person finds a job while receiving the basic income term, the income will still last for 2 years. The main reason that Finland is practicing the basic income system is to solve its serious unemployment problem. Finland’s unemployment rate almost reached 12% in 2016, and this rate is high compared to Korea’s unemployment rate which is at 4%. People do not try to look for jobs because they are worried that they might lose their unemployment compensation if they find a job. Moreover, a high unemployment rate leads to spending a great amount of welfare expense. After the basic income policy was introduced, the Finnish government interviewed people who received basic income, and announced that they were satis_ed with receiving the income and they are going to try to be strong participating citizens.

It is still too early to judge whether the basic income system is a good welfare system which we should move toward. Being related deeply to tax hikes, the basic income is a greatly sensitive issue to lots of people, which has led to countless controversies. All social welfare systems need substantial amounts of capital. Social agreement is also needed, whether we should invest more capital to amend our current social welfare system for a better system, or maintain the present social welfare system embracing the problems. Although there are unsolved matters yet, when the economy is stable and the limits that the current social welfare system experience have been solved, then maybe we can introduce a universal and unconditional social welfare system also.

이정현  cathie3526@naver.com

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