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South Korea's Universal Basic Income Plan: A New Economic Silver Lining or a Fiasco In The Making?

With a bolstering economy, a great deal of praise for handling the COVID-19 pandemic, and the recent law announcing BTS to postpone their military service, South Korea (formally known as the Republic of Korea) has managed to remain as one of the most well-known nations in the world. However, these might not be the only things it has gained increasing visibility for. Amongst many, South Korea’s relatively new universal basic income program focussed on paying the Korean youth a fixed amount of money especially amidst the Coronavirus pandemic has received a myriad of responses from academics, researchers, and policy enthusiasts worldwide.

For context, Universal Basic Income is a long-debated socio-economic policy move that entails providing citizens of a nation with direct cash transfers periodically, universally, and unconditionally. It has been advocated on the lines of providing gender equity, increased consumption, better market cycles, and social justice in society. Commonly known as UBI, this policy ensures that there are no particular eligibility criteria for anyone to receive such a cash transfer (except the occasional age limit of being 18 or an adult) and it is aimed at providing social assistance to improve the living conditions of all the citizens. According to the World Bank, at present there is no permanent Universal Basic Income program set in place by any country, however numerous countries have experimented with the same on smaller scales. South Korea on similar lines has put into work its take on the UBI program


The Plan

Known as the Youth Basic Income Program, this partial Universal Basic Income plan was initiated in April of 2018 as a pilot project in the Gyeonggi Do Province of South Korea by the governor of the province Lee Jae Myung. The province comprises 31 major cities and counties surrounding the capital of South Korea, Seoul. Introduced first in Seongnam City in Gyeonggi Do, the Youth Basic Income Programme targets all 24-year-old residents who have lived in the province for three consecutive years or have lived in the province for over ten years are provided with quarterly payments of 2,50,000 KRW (Rs. 16,400 INR or $220 USD approx.) totaling up to 1,000,000 KRW (roughly Rs. 65,000 INR or $900 USD) per year. This money transfer is, however, made in the form of a local currency which can be used in the manner of a card, tributary gift card, or a mobile application making this cash transfer ironically cashless.

According to the Basic Income Korean Network, about 175,000 people are eligible to receive these payments in a year making this the second largest policy experiment on such a scale.

Why a “Cashless Cash Transfer”?

One of the primary reasons for introducing a local currency instead of direct cash transfers is the fact that cash transfers might make the entire policy as Lee Jae Myung calls it “populistic”. The local currency can be used directly in traditional Korean markets and neighborhood stores instead of big chain agglomerations boosting the local economy and circumnavigating the money within the economy. A tax deduction provision at the end of the year on using the local currency also seems attractive to the Gyeonggi residents. The small business owners in the province are also happy as this particular positive restriction has boosted their sales up and allowed the growth of small local businesses instead of large departmental retailers. The money being given to the residents is being spent in the markets and given back to the community via greater consumption of the households.

Why a “Youth” Basic Income?

The program is focused primarily on providing an unconditional income for the “youth” or 24-year-olds in the province, as this category of people is at the prime of transitioning into the job market after completion of education. Considering the ever-growing competition in the Korean job market, the provision of a universal basic income alleviates pressure from the young adults’ minds and provides them social support to get by the neoliberal competitive market.

Response from Participants

A recent Satisfaction Survey Report on the Youth Basic Income in Gyeonggi Province showed satisfaction of 77% among 3500 of its users. The respondents believe the inclusivity of the program was manifested in a way that helped all 24-year-old youths’ who are entering or have entered the job-seeking market. Appreciation for cash-like payments was also mentioned which is a positive point and will help in boosting the economy. Along with this the respondents also highlighted that though the payments were not enough to live off on, such direct cash transfers provided them psychological comfort and a better mindset for job searching.

Universal Basic Income Just a Political Move?

The entire plan for UBI was introduced first by Lee Jae Myung of the Democratic Party. He assumed office as Governor of Gyeonggi Do Province in 2018 and gained massive popularity for his Youth Basic Income Program. He wants to take this plan out of Gyeonggi Do and create a Universal Basic Income covering all citizens of South Korea. He proposes a steady rise in taxes on real estate holdings which are currently on the lower end in Korea. He wants to give this program a wider support base to enable creativity among people and trigger a “ripple effect” via this policy. Lee Jae Myung is also a leading contender ahead of South Korea’s next presidential polls in 2022, which hints at the fact that this envisioned UBI policy is not solely for social welfare but also political propaganda.

Hope for the Future

Despite the irregularities in the UBI plan, Lee has publicly admitted that the entire UBI program will need revisions as it gets expanded in stages. The Youth Basic Income program has faced criticism regarding future funding in case of expansion as it could effectively cost the country nearly half of its national budget. Unwanted inflation and restriction of consumers to the local economy might also crop up as issues on a national scale. Regardless, Gyeonggi Do has definitely made a mark in paving way for exemplary change in South Korea. It will provide its users a social safety net and lessen the psychological and economic burden. It will allow people to rethink their spending habits and make decisions more freely. The complete impact of the program still remains unknown, however, its significance especially in a post-COVID-19 economy has increased massively, primarily aimed at mitigating the socio-economic distress of the South Korean citizens. If implemented successfully in the future, South Korea would become the first thriving nation with a full-fledged Universal Basic Income program. It might set a positive example for nations all around the globe and get other economies pondering over their own UBI programs. A ray of hope hangs in the balance as people all around the world watch this economic fallacy turn into reality.

By Asmita Jain


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