General welfare
Before leaving the post of finance minister on Thursday, Yoon Jeung-hyun called on his ministry to serve as the last line of defense against onrushing demands for general welfare. His advice could not have been timelier, given that political parties and politicians, those with presidential ambitions in particular, are shifting their focus from selective welfare to general welfare with little regard for the nation’s fiscal capacity.
“The Ministry of Strategy and Finance may have to wage a lone battle against spellbinding promises on the free-of-charge provision (of welfare benefits) that are spreading like a fad,” Yoon said. “But it must not be afraid of it. Instead, it should not allow itself to be swayed, like a (heavy) rock, when (fiscal) principles are concerned.”
But he said the ministry will have to focus on low-income families, jobless people, women and senior citizens in its welfare programs. Here again, it goes without saying that welfare spending for underprivileged people should be increased within the scope permitted by the nation’s public finances.
Unlike in the United States and some other countries, Korea has no constitutional provision for general welfare as opposed to selective welfare where benefits are provided not for all people but for needy ones. In the absence of a direct mention of general welfare in the Constitution, its advocates often cite Article 34, Section 1, when they demand more money be spent on general welfare. The section reads, “All citizens are entitled to a life worthy of human beings.”
The provision of general welfare is a policy of the main opposition Democratic Party. It is written in its constitution. Based on the policy, it says it will promote the provision of school lunches, medical care and child care free of charge.
The new finance minister, Bahk Jae-wan, said during his confirmation hearing that he was opposed to the proposed provision of welfare benefits at no cost. Still, there is no guarantee that his opposition should prevail. The ruling Grand National Party may succumb to a temptation to engage the opposition with its own proposal for free welfare benefits ahead of the parliamentary and presidential elections, scheduled respectively for April and December next year.
A case in point in this regard is the opposition’s earlier proposal to halve university tuition fees as a general welfare program. As discontent simmered on campus with tuition costs approaching 10 million a year, the floor leader of the ruling party, Rep. Hwang Woo-yea, recently co-opted the proposal for a 50 percent cut.
The initial response from the administration was negative. But it did not take long before it promised to consider cutting tuition for university students from families with annual incomes below a certain level.
The provision of free subway rides for those aged 65 or older shows why spending increases on general welfare should be curbed.
Losses on subway operation in Seoul alone are projected to rise from 479.3 billion in 2010 won to 574.8 billion won this year. To make up for part of these losses, the city administration is planning to raise the basic fare from 900 won to 1,000 won or 1,100 won in July, adding to mounting inflationary pressure.
Despite the losses, all people aged 65 or older, be they destitute or superrich, are allowed to ride the subway free of charge. Is this fair? What about a jobless young man or a man with a monthly income of less than 1 million won who has to pay the full price?
When the parliamentary and presidential elections near, rival political parties and presidential hopefuls will undoubtedly make welfare promises to ingratiate themselves to the electorate. But their feasibility must be put under the scrutiny of fiscal experts. It is necessary to curb welfare expenditures if the nation is to avoid following in the footsteps of Greece and other debt-ridden European countries.
“The Ministry of Strategy and Finance may have to wage a lone battle against spellbinding promises on the free-of-charge provision (of welfare benefits) that are spreading like a fad,” Yoon said. “But it must not be afraid of it. Instead, it should not allow itself to be swayed, like a (heavy) rock, when (fiscal) principles are concerned.”
But he said the ministry will have to focus on low-income families, jobless people, women and senior citizens in its welfare programs. Here again, it goes without saying that welfare spending for underprivileged people should be increased within the scope permitted by the nation’s public finances.
Unlike in the United States and some other countries, Korea has no constitutional provision for general welfare as opposed to selective welfare where benefits are provided not for all people but for needy ones. In the absence of a direct mention of general welfare in the Constitution, its advocates often cite Article 34, Section 1, when they demand more money be spent on general welfare. The section reads, “All citizens are entitled to a life worthy of human beings.”
The provision of general welfare is a policy of the main opposition Democratic Party. It is written in its constitution. Based on the policy, it says it will promote the provision of school lunches, medical care and child care free of charge.
The new finance minister, Bahk Jae-wan, said during his confirmation hearing that he was opposed to the proposed provision of welfare benefits at no cost. Still, there is no guarantee that his opposition should prevail. The ruling Grand National Party may succumb to a temptation to engage the opposition with its own proposal for free welfare benefits ahead of the parliamentary and presidential elections, scheduled respectively for April and December next year.
A case in point in this regard is the opposition’s earlier proposal to halve university tuition fees as a general welfare program. As discontent simmered on campus with tuition costs approaching 10 million a year, the floor leader of the ruling party, Rep. Hwang Woo-yea, recently co-opted the proposal for a 50 percent cut.
The initial response from the administration was negative. But it did not take long before it promised to consider cutting tuition for university students from families with annual incomes below a certain level.
The provision of free subway rides for those aged 65 or older shows why spending increases on general welfare should be curbed.
Losses on subway operation in Seoul alone are projected to rise from 479.3 billion in 2010 won to 574.8 billion won this year. To make up for part of these losses, the city administration is planning to raise the basic fare from 900 won to 1,000 won or 1,100 won in July, adding to mounting inflationary pressure.
Despite the losses, all people aged 65 or older, be they destitute or superrich, are allowed to ride the subway free of charge. Is this fair? What about a jobless young man or a man with a monthly income of less than 1 million won who has to pay the full price?
When the parliamentary and presidential elections near, rival political parties and presidential hopefuls will undoubtedly make welfare promises to ingratiate themselves to the electorate. But their feasibility must be put under the scrutiny of fiscal experts. It is necessary to curb welfare expenditures if the nation is to avoid following in the footsteps of Greece and other debt-ridden European countries.
Mobile rate cuts
SK Telecom, the nation’s largest mobile carrier, is set to cut its service charges from September. According to one estimate, the rate cuts, which include a 1,000 won discount on the basic service charge and 50 free text messages each month, amount to an average of 28,000 won a year per customer.
The rate cuts should please consumers. But not too much. Consumer organizations and advocacy groups complain that they are too small.
A few months ago, the government claimed the three mobile carriers, whose profits were 3.6 trillion won last year, had room for service rate cuts. But the carriers balked, insisting that they could not afford the cuts because they needed to invest enormous amounts of money in next-generation telecom services.
SK Telecom’s rate cuts are anything but voluntary. The carrier is making the cuts under pressure from the state telecom regulator, the Korea Communications Commission. Barring unexpected developments, two other mobile carriers, KT and LG Uplus, will soon follow suit.
All that a mobile carrier has to do regarding rate adjustments is to report them. But the state regulator announced it agreed with SK Telecom on the rate cuts. By doing so, it virtually admitted arm twisting. It did what consumer advocacy groups, not a government agency, might do.
This is not to say that mobile service charges are reasonable. They are so high that spending on telecommunications services account for 6.1 percent of household expenditures, 2.5 times higher than the OECD average.
Even so, the state regulator was ill-advised to resort to an extralegal means of arm twisting to push SK Telecom to lower its service charges. Mobile carriers, and all private-sector business enterprises for that matter, should be left alone when they are not suspected of breaching the fair trade act by fixing prices.
What the government needs to do is encourage competition among private businesses so that they will provide goods and services at lower prices. It should stop putting undue pressure on them in pursuit of its own administrative convenience.
The rate cuts should please consumers. But not too much. Consumer organizations and advocacy groups complain that they are too small.
A few months ago, the government claimed the three mobile carriers, whose profits were 3.6 trillion won last year, had room for service rate cuts. But the carriers balked, insisting that they could not afford the cuts because they needed to invest enormous amounts of money in next-generation telecom services.
SK Telecom’s rate cuts are anything but voluntary. The carrier is making the cuts under pressure from the state telecom regulator, the Korea Communications Commission. Barring unexpected developments, two other mobile carriers, KT and LG Uplus, will soon follow suit.
All that a mobile carrier has to do regarding rate adjustments is to report them. But the state regulator announced it agreed with SK Telecom on the rate cuts. By doing so, it virtually admitted arm twisting. It did what consumer advocacy groups, not a government agency, might do.
This is not to say that mobile service charges are reasonable. They are so high that spending on telecommunications services account for 6.1 percent of household expenditures, 2.5 times higher than the OECD average.
Even so, the state regulator was ill-advised to resort to an extralegal means of arm twisting to push SK Telecom to lower its service charges. Mobile carriers, and all private-sector business enterprises for that matter, should be left alone when they are not suspected of breaching the fair trade act by fixing prices.
What the government needs to do is encourage competition among private businesses so that they will provide goods and services at lower prices. It should stop putting undue pressure on them in pursuit of its own administrative convenience.
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