The welfare expenditure of Korea has been increasing at rapid pace among central government outlays by function since 2000. According to the government finance statistics, the share of welfare sector, including expenditure on health and social protection, accounts for 27.7 percent of the total government outlays in 2010. The annual growth rate of welfare expenditure is 1.5 times higher than that of the gov-ernment outlays from 2005 to 2010.
This study analyzes both structure and management of welfare budget on the rise, and suggests some policy recommendations to enhance the efficiency of wel-fare spending. For this purpose, the welfare sector’s budget was closely examined with respect to fiscal transparency, efficiency, equity, effectiveness, and sustainabil-ity.
As a result, several problems were pointed out in order to improve the perfor-mance of welfare sector’s budget management. These include the rigidity of spend-ing arising from predominance of entitlement spending and inefficient resource allocation, unfunded mandates burden to local governments, the fiscal imbalance between contributions and benefits of Public Pensions, and the exclusion of Na-tional Health Insurance program from the consolidated central government bud-get. If the National Health Insurance and the Long-term Care Insurance accounts were operated within the government outlays, the welfare expenditure would ac-count for 35.2 percent of central government spending. It is 7.5 percent points high-er than figure shown in the existing government statistics. Compared with other countries, this level of Korea’s welfare spending corresponds to about 74 percent of the OECD countries average. Moreover, the factors to boost welfare spending in Korea still remain at low levels. The pension benefits to GDP, for example, only stood at 22 percent of OECD countries average.
On the basis of these critical reviews, this study raised some policy suggestions and legislative issues to be amended, so as to enhance the efficiency and sustain-ability of welfare sector’s spending in a rapidly-aging society.
This study analyzes both structure and management of welfare budget on the rise, and suggests some policy recommendations to enhance the efficiency of wel-fare spending. For this purpose, the welfare sector’s budget was closely examined with respect to fiscal transparency, efficiency, equity, effectiveness, and sustainabil-ity.
As a result, several problems were pointed out in order to improve the perfor-mance of welfare sector’s budget management. These include the rigidity of spend-ing arising from predominance of entitlement spending and inefficient resource allocation, unfunded mandates burden to local governments, the fiscal imbalance between contributions and benefits of Public Pensions, and the exclusion of Na-tional Health Insurance program from the consolidated central government bud-get. If the National Health Insurance and the Long-term Care Insurance accounts were operated within the government outlays, the welfare expenditure would ac-count for 35.2 percent of central government spending. It is 7.5 percent points high-er than figure shown in the existing government statistics. Compared with other countries, this level of Korea’s welfare spending corresponds to about 74 percent of the OECD countries average. Moreover, the factors to boost welfare spending in Korea still remain at low levels. The pension benefits to GDP, for example, only stood at 22 percent of OECD countries average.
On the basis of these critical reviews, this study raised some policy suggestions and legislative issues to be amended, so as to enhance the efficiency and sustain-ability of welfare sector’s spending in a rapidly-aging society.