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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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a Better Future

with Social Investment

March 26, 2007

Rhyu, Simin


Ministry of Health and Welfare, ROK



  • 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



The Overview of

Health and Welfare in Korea


Overview of Health & Welfare in Korea

Social Security Expenditure /GDP

Health & Welfare Policy Index


Public Medical Expenditure/GDP


Public Social Expenditure /GDP

OECD Average

Income Support for Workable Population/GDP

Tax Rate


Health & Welfare States Index

Child Survival Rate

Aging Population Rate

Life Expectancy at Birth


Birth Rate

Cancer Mortality Rate


Recent Development

Before the Financial Crisis


After the Financial Crisis

Roles of the Government

Focus on Physical Growth


Reconciliation of

Growth & Welfare


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



Challenges and Paradigm Shift

-Social Investment-


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.


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)


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


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)


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


Domestic Challenges: New Health Risks

Physical & mental health problems

- reduce life quality

- cause labor loss

- induce heavy medical expenses.





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)


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)


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


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

  • 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:


  • 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




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)



Investment for Children

in terms of Social Investment


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 &


for Social Investment


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

















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