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Economic Growth and Poverty Reduction Strategies in Korea. September 25, 2006 Kim, Yong-Moon (President of the Korea Institute for Health and Social Affairs). Contents. I. Introduction II. Economic Growth, Poverty and Inequality in Korea - PowerPoint PPT Presentation
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September 25, 2006
Kim, Yong-Moon(President of the Korea Institute for
Health and Social Affairs)
Economic Growth and Poverty Reduction Strategies in Korea
2
I. Introduction
II. Economic Growth, Poverty and Inequality in Korea
III. Changes in Poverty Reduction Strategies in Korea
IV. Implications of Korea’s Experiences
V. Suggestions
Contents
3
Economic Growth and Poverty Reduction in Korea
Before 1997
Government-led development
strategies
Export-driven industrialization
Successful birth control
I. Introduction
Economicgrowth
Decrease in absolute poverty rate
4
Since 1997
Emerging Issues
• Relative poverty
• Inequality
• Bi-polarization in Income distribution
I. Introduction
Financial Crisis(1997)
5
Economic Growth and Reduction in Absolute Poverty
Rapid economic growth contributed to the decrease in absolute poverty rates: “Floating Effect”
1. Economic Growth and Absolute Poverty
II. Economic Growth, Poverty and Inequality in Korea
GNP per capita(US$)
Absolute poverty Rate(%)
710 (1965)
14,162 (2004)
41.4 (1965)
under 1~2 (2004)
6
0
2000
4000
6000
8000
10000
12000
14000
16000
1965 1970 1975 1980 1985 1990 1995 2004
051015202530354045
GNP per capita PPP(US $) Poverty as % of pop
Economic Growth and Absolute Poverty in Korea
II. Economic Growth, Poverty and Inequality in Korea
7
Economic Growth and Poverty Reduction by Region
-2
0
2
4
6
8
East Asia South Asia Sub-SaharanLatin America Africa Total -5
05
10
15
2025
30
Per Capita Grow th1981-90 Per Capita Grow th 1991-2001
poverty reduction(%p) 1981-90 poverty reduction(%p) 1991-2001
A higher economic growth rate relates to a larger decrease in absolute poverty rate in other regions.
II. Economic Growth, Poverty and Inequality in Korea
8
Key Factors for Reducing Absolute Poverty
Active and heavy investment in human and physical
capital by the public and the private sectors
Effective family-planning policies
Strong family planning programs
II. Economic Growth, Poverty and Inequality in Korea
Trend in Total Fertility Rate
4.53 (1970) 2.83 (1980) 1.59 (1990)
9
Improved social safety nets
Public Assistance:
Launched in 1961
Target group: traditionally vulnerable groups such as the elderly, the disabled, and children
Expanded to all the citizen as a right in 1999
Industrial Accident Compensation Insurance:
Launched in 1964
Expanded to all the workplaces with at least one employee in 2000
II. Economic Growth, Poverty and Inequality in Korea
10
National Health Insurance Scheme:
Introduced in 1977 for workplaces with at least 500 employees
Expanded to all the Korean citizens in 1988
National Pension Scheme:
Launched in 1988 to cover workplaces with 10 employees or more
Expanded to all the Korean citizens in 1999
Unemployment Insurance:
Unemployment allowances, job-searching support, job training
II. Economic Growth, Poverty and Inequality in Korea
11
Trend in the Relative Poverty Rates
2. Economic Growth and Relative Poverty
Increase in the Relative Poverty Rates
8.6% in 1996 10.0% in 2000 11.7% in 2004.
(poverty line: 50% of medium income)
0
2
4
6
8
10
12
'96 '97 '98 '99 '00 '01 '02 '03 '04
II. Economic Growth, Poverty and Inequality in Korea
12
Factors for the Increase in Relative Poverty
Globalization, and industrial and job insecurity
increase in the working poor
Low fertility and population ageing
increase in the poor aged
Changes in family structure and the break-up of families Increase in the poor female householders
II. Economic Growth, Poverty and Inequality in Korea
13
The importance of the strategies is increasingly
recognized :
To tackle relative poverty issues
To enhance equal income distribution
To promote social integration
II. Economic Growth, Poverty and Inequality in Korea
14
Inequality before and after the Financial Crisis
3. Economic Growth and Inequality
II. Economic Growth, Poverty and Inequality in Korea
The more serious the inequality, the slower the economic growth
II. Economic Growth, Poverty and Inequality in Korea
Before the Crisis
• High economic growth
• Relatively equal society
• Low economic
growth
• Increased inequality
After the Crisis
15
Economic Growth Rate and the Gini Indicator
Sources: Raw data from the Korea National Statistical Office's 『 Survey of Urban Households 』 (published annually), for each year The Bank of Korea's website data, for each year
II. Economic Growth, Poverty and Inequality in Korea
16
1. Changes in Principle
National development strategy before 1997Concentrating on economic growth Welfare as residual measures for the poor
Development strategy since 2003
Harmonized approach between growth and welfare
focusing on sustainable development
III. Changes in Poverty Reduction Strategies in Korea
“Growth First, Welfare Later”
“Growth Together with Welfare”
17
2. Changes in Target Beneficiaries
III. Changes in Poverty Reduction Strategies in Korea
III. Changes in Poverty Reduction Strategies in Korea
The poor unable to work
The poor
able to work
unable to work
The poorand the near poor
able to work
unable to work
Financial Crisis“Participation Government”
1948~1997 1998~2002 2003~
18
3. Korea's Future Vision for anti-poverty policy
III. Changes in Poverty Reduction Strategies in KoreaIII. Changes in Poverty Reduction Strategies in Korea
Optimal social welfare expenditure
Reinforced social safety net
Society Free of Poverty
Virtuous Cycle of Distribution and Growth
Harmonized growth of Economy and Welfare Eradicate Absolute Poverty
and Reduce Relative Poverty
Fostering new growth industries
Increased jobopportunity
19
The importance of economic growth and
anti-poverty policies should be emphasized
to alleviate absolute poverty.
It is desirable to expand the target groups
from the poor unable to work, to the poor
able to work and the near poor.
Ⅳ. Implications of Korea’s Experiences
20
Welfare policies should be designed to succeed in promoting
motivation to work among the poor.
Proper attention should be paid to various social problems
resulting from low fertility and rapid population aging.
Ⅳ. Implications of Korea’s Experiences
21
The most efficient way is to consider
poverty eradication and income
distribution issue from the initial level
of mapping out strategies for
development and growth.
Ⅴ. SuggestionsⅤ. Suggestions
22
But putting too much importance on
distribution will weaken the
potential of economic growth and
efficiency.
Ⅴ. SuggestionsⅤ. Suggestions
23
As in the “Fool in the Shower”, plying
between growth and distribution will
cost a lot of social expenses while
controlling its side effects.
Ⅴ. SuggestionsⅤ. SuggestionsⅤ. Suggestions
24
For long-term and sustainable
development, emphasizing one
side is not desirable.
Ⅴ. SuggestionsⅤ. SuggestionsⅤ. Suggestions
25
Ⅴ. Suggestions
It is important to set a policy
direction which can establish
positive relation between growth
and distribution as well as
harmonize efficiency and equality.
Ⅴ. SuggestionsⅤ. Suggestions
26
Ⅴ. Suggestions
Korea's "Participation Government"
is emphasizing the importance of co-
growth while trying to embody the
vision of Social Investment State into
policies.
Ⅴ. SuggestionsⅤ. Suggestions
27
Thank You
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