Korea to be less innovative with universal basic income

Korea to be less innovative with universal basic income

Samuel Wilson

By Samuel Wilson

There is a growing debate in many countries around the world about whether or not to start a universal basic income (UBI) system, which could possibly provide unconditional income to all residents regardless of status of employment, income or even need.

Indeed, with the ongoing COVID-19 pandemic and the economic difficulty many people are currently facing in the Korean society, the government here is also discussing the pros and cons of introducing a UBI type of system. Yet, what really is a UBI?

UBI is a government-guaranteed payment where money gained through tax revenue for example, is dispersed among all residence regardless of status and employment. In some countries, it may be referred to as citizen’s income, guaranteed minimum income, or even a basic income.

Furthermore, the idea behind UBI is to provide enough funding to cover the basic cost of living and establish a sense of financial security for everyone.

Those that support UBI believe that such an initiative could possibly help reduce or eliminate poverty, improve income security for all and boost the general welfare of citizens. Furthermore, an increase in income created by UBI could possibly boost the economy as the increased cash flow would mean more money for people to spend on goods.

Some also believe that it would help provide income to young students while attending college, thus helping them to focus on school and successfully graduate. Depending on how it was implemented, UBI payments could be created to vary based on such social characteristics as if the person was a working-age adult, stay-at-home mom, child, retiree or possibly disabled, to name just a few.

However, others argue that such a system would be unbelievably expensive, challenging to introduce and could be counterproductive by encouraging many to decide not to work. Additionally, any short-term boost in the economy caused by this increased cash flow would most likely lead to uncontrollable inflation.

This idea of basic income also ignores the idea of poverty itself as it redistributes income upward increasing poverty and inequality rather than benefiting primarily the lower class. Moreover, any funding collected for UBI would mean an increase in taxes, which would most likely diminish the net income of those who still want to work.

So, should Korea implement the UBI system?

If the idea of basic income is approved by the Korean government and every adult Korean received 1 million won ($851) monthly, it would cost Korea about $3 billion yearly. If other demographics were included or the amount of income increased to support the idea of financial security and the minimum cost of living for all, the amount of money going towards UBI would most likely spiral upwards out of control.

Yes, all should fully recognize that more is needed to help those in need, including the homeless, unemployed and the growing elderly population. Also, in 2019, 16.3 percent of Koreans were living in poverty with less than half of the median disposable income.

Therefore, help is needed for these citizens. However, there are already strong welfare programs, which could be expanded to more fully assist these marginalized, vulnerable and other groups in need. Additionally, UBI will not only affect the economy, but could lead to a labor and skills shortage as there will be less motivation and desire to improve skills for work.

As a result, this may lead to an increasingly less effective economy and less prosperous nation.

More importantly, Korea, once ravished by war, successfully transformed itself from an OECD aid-receiving country to a donor country with a GDP ranked 10th in the world in 2021. This “Miracle of the Han” as it is known, was directly due to the innovation, hard work and sacrifice of its citizens.

Therefore, the idea of UBI or unconditional payment is not the right solution for the weakening Korean economy. It is an attractive idea to be paid unconditionally without work. Yet without the incentive and reward for hard work, the labor force and economy would most likely contract, leading to more, not less, poverty.

Therefore, the introduction of the UBI system in Korea is the wrong idea in this time of the COVID-19 pandemic. As mentioned above, this eutrophic thought lessens the incentive to work and costs a substantial amount that would put unforeseen pressure on the tax systems and the government, while taking the motivation away to be innovative and successful.

In Korea, the day may come for a UBI type of system for all, and the thought of equally helping all citizens is extremely appealing. Yet that day is not here yet.

Samuel Wilson is a student at George Mason University Korea.

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