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Making a Better Future with Social Investment

Making a Better Future with Social Investment. March 26, 2007 Rhyu, Simin Minister Ministry of Health and Welfare, ROK. CONTENTS. The Overview of Health & Welfare in Korea Challenges and Paradigm Shift: Social Investment Investment for Children in terms of Social Investment

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Making a Better Future with Social Investment

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  1. Making a Better Future with Social Investment March 26, 2007 Rhyu, Simin Minister Ministry of Health and Welfare, ROK

  2. CONTENTS • The Overview of Health & Welfare in Korea • Challenges and Paradigm Shift: Social Investment • Investment for Children in terms of Social Investment IV. National Finance & Governance for Social Investment

  3. I The Overview of Health and Welfare in Korea

  4. Overview of Health & Welfare in Korea Social Security Expenditure /GDP Health & Welfare Policy Index Risk Public Medical Expenditure/GDP Opportunity Public Social Expenditure /GDP OECD Average Income Support for Workable Population/GDP Tax Rate /GDP Health & Welfare States Index Child Survival Rate Aging Population Rate Life Expectancy at Birth Total Birth Rate Cancer Mortality Rate

  5. Recent Development Before the Financial Crisis (1998) After the Financial Crisis Roles of the Government Focus on Physical Growth (Capital-oriented) Reconciliation of Growth & Welfare (Human-oriented) Focus on Human Capital, Balance between Growth & Welfare, Market Driven Quantitative Input, Imbalanced Growth, Government-driven Growth Strategy • 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 Family Dependent, Residual Model of Welfare Welfare Strategy

  6. II Challenges and Paradigm Shift -Social Investment-

  7. Social Changes & Challenges in Korea Domestic Challenges 1. Slowdown of Potential Growth Rate 2. Growing Bipolarization 3. Low Birth Rate/ Aging Population 4. Changes in Family Structure 5. New Health Risks 6. Increasing Uncertainty for the Future Life Global Challenges 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.

  8. Domestic Challenges

  9. 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)

  10. Domestic Challenges: Growing Bipolarization Growing Income Inequality & Rapid Increase in ER Index If bipolariza-tion continues, (1) increasing working poor class; (2) Limiting the possibility of social mobility; and (3) deepening the conflicts between classes. Decrease in Trickle-Down Effect

  11. Domestic Challenges: Low Birth Rate/Population Aging Low Birth Rate Population Aging • 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 • 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)

  12. Domestic Challenges: Changes in Family Structure 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) Increase in Women’s Economic Participation and Divorce Rate

  13. Domestic Challenges: New Health Risks Physical & mental health problems - reduce life quality - cause labor loss - induce heavy medical expenses. Women Men 2005 1998 Obesity Rate below 18 yrs. Old (‘98 /‘05) Health Status of the Middle-Aged (Korea/OECD) 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)

  14. Domestic Challenges: Increasing Uncertainty for the Future Life 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)

  15. Global Challenges

  16. Global Challenges: Globalization/Information-based Economy Globalization (FTA) Knowledge & Information Based Economy • 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 • 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. Market Opening of Major Countries

  17. 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

  18. Action Plan of Social Investment Policies • High quality of life through individual capacity development • Investment in human capital to cope with various risks arising out of the market economy VISION GOAL • 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

  19. Ten Core Actions for Social Investment 3 Goals Ten Core Actions Equal Opportunity & Improved Potential (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 Active Economic Participa-tion (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 Efficient Welfare (9) Welfare Delivered by Both Public&Private Sectors (10) Fiscal Reform (Sustainability)

  20. III Investment for Children in terms of Social Investment

  21. 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)

  22. 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” ‘

  23. 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

  24. 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

  25. IV National Finance & Governance for Social Investment

  26. 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 The Ratio of Welfare Expenditure to Public Finance People’s Participatory 50.0 Civil Welfare 40.0 30.0 20.0 Economy 10.0 0.0 1980 1990 2000 2010 2020 2030

  27. Social Governance: Responsibility Social Services Cooperation between public and private sectors Intervention in Social Conflicts Social Capital : Trust Building between Government-Civic Society Coordination between Economic & Social Policies High-Quality Social Welfare Infrastructure

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