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Making a Better Future
with Social Investment
March 26, 2007
Rhyu, Simin
MinisterMinistry of Health and Welfare, ROK
CONTENTS
I. The Overview of Health & Welfare in Korea
II. Challenges and Paradigm Shift: Social Investment
III. Investment for Children in terms of Social Investment
IV. National Finance & Governance for Social Investment
The Overview ofHealth and Welfare in
Korea
I
Overview of Health & Welfare in Korea
Risk
OpportunityOECD Average
Health
& W
elfa
re P
olic
y
Ind
ex
Health
& W
elfa
re S
tate
s
Ind
ex
Public Medical Expenditure/GDP
Social Security Expenditure /GDP
Public Social Expenditure /GDP
Income Support for Workable Population/GDP
Tax Rate
/GDP
Child Survival Rate
Life Expectancy at Birth
Aging Population Rate
Total
Birth Rate
Cancer Mortality Rate
Recent Development
Focus on Physical Growth
(Capital-oriented)
Reconciliation of Growth & Welfare(Human-oriented)
Before the Financial Crisis (1998)
After the Financial Crisis After the Financial Crisis
Roles of the
Government
Roles of the
Government
Quantitative Input, Imbalanced Growth, Government-driven
Focus on Human Capital, Balance betweenGrowth & Welfare,
Market Driven
Growth Strategy Growth
Strategy
Family Dependent,Residual Model of
Welfare
Increased Role of the Gov. Rapid Growth in Welfare - National System for Minimum Living Standard- National Pension Scheme- Separation of Prescription & Drug Dispensing- Act to Address Low Birth Rate and Population Aging
Welfare StrategyWelfare Strategy
Challenges and Paradigm Shift
-Social Investment-
II
Social Changes & Challenges in Korea
Domestic Challenge
s
Global Challenges
1. Slowdown of Potential Growth Rate2. Growing Bipolarization3. Low Birth Rate/ Aging Population4. Changes in Family Structure5. New Health Risks6. Increasing Uncertainty for the Future Life
1. Globalization (FTA)2. Knowledge- and Information-based Economy
The challenges arise not only out of traditional but also new social risks, and is like to
intensify social instability.
Domestic Challenges
Domestic Challenges: Slowdown of Potential Growth Rate Before 90s: 6~8% growth
rate After mid-90s: Decrease in
GR 2000s: 4% GR
Population aging → Reduced labor & capital inputs → Slowdown of potential growth rate (KDI, 2006)
Off-shoring of labor-intensive manufacturing facilities, industrial automation, etc. → weakened job-creating effect of economic growth (Jobless Growth)
Growing Income Inequality & Rapid Increase in ER Index
Decrease in Trickle-Down Effect
If bipolariza-tion continues,(1) increasing working poor class;(2) Limiting the possibility of social mobility; and (3) deepening the conflicts between classes.
Domestic Challenges: Growing Bipolarization
Low Birth Rate
1.08 (2005) - Lowest in the world - USA(2.01), Japan(1.24), OECD(1.6) Total population Decline
starting in 2020 Legislation of the
Framework Act on Low Birth Rate & Aging Society
Population Aging
Rapid Aging Process- Aging Society (2000)- Aged Society (2018)- Super-aged Society (2026) - Most Aged State in the World (2050)
Elderly Dependency Ratio (%) : 12.2 (2005) → 21.7 (2020) → 71.4(2050)
Domestic Challenges: Low Birth Rate/Population Aging
Increase in Women’s Economic Participation and Divorce Rate
Smaller families and change in lifestyle → Weakened family function → Greater demand for public care service※ Ratio of Lone Elderly: 16.1% (’00) → 17.9% (’05)
Domestic Challenges: Changes in Family Structure
Physical & mental health problems - reduce life quality- cause labor loss - induce heavy medical expenses.
8.8%
1.8%
0.78%
6%
1.5%
0.2%
Diabetes Stroke Suspicious Dementia
Korea
OECD
Health Status of the Middle-Aged (Korea/OECD)Obesity Rate below 18 yrs. Old (‘98 /‘05)
Although mental health problems such as depression, suicide, etc. leads to labor loss and decline in quality of life, fewer system for protection is in place. - Suicide Rate: Top among OECD member states in 2005 (26.1 suicide/100,000)
Domestic Challenges: New Health Risks
Men Women
2005
1998
According to Social Statistics Survey (2006): 45% of the respondents answered “I am in LOWER-CLASS”- Compared to 2003 survey, there is little change in the number of respondents who answered “Upper class”, but significant difference in “Middle Class”(56.2% → 53.4%) and “Lower Class” (42.4% → 45.2%).
Class Perception Survey (Korea National Statistical Office, 2006)
1.4%
56.2%
42.4%
1.5%
53.4%
45.2%
High Class Middle Class Low Class
20032006
Domestic Challenges: Increasing Uncertainty for the Future Life
Global Challenges
Global Challenges: Globalization/Information-based Economy
Globalization (FTA)
Globalization & regional economic integration posing as both risks and opportunities
Korea-USA FTA: a challenge that night have effects as great as the financial crisis
Knowledge & Information
Based Economy
Core Strategy - Nurturing human capital, especially skilled manpower
New Approaches for Social Policy that adds human capital and social investment to the existing programs of social security.
24.1%
68%
83.8%
24.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1980 1985 1990 1995 2000 2004
KoreaUSAJapanChina
Market Opening of Major Countries
Definition and Elements of Social Investment
Definition of Social Investment Policies
Social Investment is the strategy which pursues economic growth and social development by magnifying the opportunities to participate in economic activities and by providing better jobs through the investment of human and social capital. (P. Taylor-Gooby(2006) ; D. Perkins(2004) ; Esping-Andersen(2002) ; A. Giddens(1998))
Key Elements of Social Investment Policies
Approach incorporating Social and Economic Policies
Investment for Equal Opportunities
Focus on Economic Participation
Emphasis on the Investment for Children as Future Citizens/Workers
Action Plan of Social Investment Policies
VISION
GOAL
High quality of life through individual capacity development
Investment in human capital to cope with various risks arising out of the market economy
Equal Opportunities Economic Activities by the Entire Population Sustainable and Efficient Welfare(Social) Policies
Support Mechanism: Direct Income Redistribution→Opportunity Redistribution
Intervention: Retrospective/Responsive→Progressive/Preventive
Target: Low-income Class (Residual) → Expansion to Universal Service/Balanced Welfare Expenditure
Priorities in Expenditure: Desire-oriented → Improving sustainability of policies by considering inducement effect of employment/industry
Welfare Supply: Mutual Responsibility between individuals & State
PRICI-
PLES
Ten Core Actions for Social Investment
Equal Opportuni
ty&
Improved Potential
Active Economic Partici
pa-tion
(1) Asset-Building & Management - Child Development Accounts (CDA)(2) Financial Support for the Needy(3) Early Capacity-Building - Sure Start/Book Start(4) Expansion of Social Services
(5) Investment for Health - Children’s Physical/Mental/Cognitive
Health(6) Active Labor Market Policy: for
Elderly/Disabled(7) Public/Community Work Chance for the
Working Poor(8) Job Creation through Value-added
Health & Welfare Industries
(9) Welfare Delivered by Both Public&Private Sectors (10) Fiscal Reform (Sustainability)
Efficient Welfare
3 Goals Ten Core Actions
Investment for Childrenin terms of Social Investment
III
Investment for Children: Asset-Building
Child Development Accounts
Support System for Asset-Building : Savings Account by parents or sponsors + matching fund by the Government
Reserves to be invested in long-term savings or stable savings account type fund (Education on Finance and Economy for Children)
Limited Use to School Tuition/Seed Money for Startup Business after age 18. (No Withdrawal before 18 yrs old.)
Effective since 2007 (At–risk Children are protected first → Extended to middle class children)
Child Trust fund (U.K.), Children’s Development Account (Singapore), IDA (U.S.A.), Canada Education Savings Program (Canada)
Investment for Children: Social Learning Network for Capacity-Building
Hope Start Project (Korean Style Head Start)
Comprehensive Welfare Service incorporating health, welfare and education of children and job training for their parents, targeting low-income families with women in pregnancy and children under 12
Effective since 2007 (starting in 16 areas with higher poverty rate → gradual expansion)
Head Start (U.S.A.) & Sure Start (U.K.)
Book Start Project
Target: Preschool children (below 5) of both parents working and with a single parent under the average income level
1:1 Reading Counseling by using suitable books for each age and character of children from “Reading Helper” ‘
Investment for Children: Physical Health Investment
Comprehensive Health Investment for Pregnancy/Birth/Growth Period
Pregnancy/Birth Total Care: Prenatal Examinations, Ultrasound Scans, etc
Infants: Free Essential Vaccination(2008), Reduction in Outpatient Medical Expenses
National Support System for School Health
Child Overweight Prevention Program
Development of and support for child fitness program Regulation on food packaging/designing/labeling
Investment for Children: Mental Health Investment
Child Behavior Improvement Program (What a change for my children!)
Children with Mental and Behavioral Disorders- Delivering medical services for mental and behavioral care depending on the severity- Strengthening mental health services such as mental health examination /counseling services - Support for children in low income families : Voucher Program
Case Management System - Establishment of test/treatment/intervention plan for children with disorders
- Training /counseling programs for parents
National Finance & Governance
for Social Investment
IV
Direction of Public Finance for Social Investment
Continuous Increase in Welfare Investment : 25.2%(2005) → 40%(2030)
Reduction in Economic Investment : 19.9%(2005) → 10%(2030)
Larger proportion of investment in Social Investment Programs
Demand Management Type Program Budget : Cost-Saving Effect
202020102000199019800.0
10.0
20.0
30.0
40.0
50.0(%)
2030
The Ratio of Welfare Expenditure to Public Finance
Welfare
Economy
Civil
People’s Participatory
Social Governance: Responsibility
Intervention inSocial
Conflicts
Social ServicesCooperation
between public and private
sectors
Social Capital: Trust
Building between
Government-Civic Society
Coordination between
Economic & Social Policies
High-Quality Social Welfare Infrastructure