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The topic for this week is comparative public policy. While the methods discussed in the textbook can be applied to any policy realm, I would like you to look at social welfare policy this week. I have listed three articles that discuss some of the differences in approaches to social welfare policy in the United States, Denmark, South Korea, and post-communist countries. For this week’s discussion board, I would like you to compare and contrast approaches to social welfare policy in these countries. You should discuss how the public views social welfare policy, how political leaders discuss welfare policy, major differences in which types of policies are preferred in the different countries, etc. Basically, I want you to use the example of social welfare policy to show how different factors within a country will influence the policy-making process.

Parochial Welfare Politics and the Small: Welfare State in South Korea
Author(s): Jae-jin Yang
Source: Comparative Politics, Vol. 45, No. 4 (July 2013), pp. 457-475
Published by: Comparative Politics, Ph.D. Programs in Political Science, City University of
New York
Stable URL: https://www.jstor.org/stable/43664076
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Parochial Welfare Politics and the Small
Welfare State in South Korea
Jae-jin Yang
Many scholars have long considered South Korea (henceforth, Korea) a welfare state
laggard. As Gosta Esping- Andersen pointed out in 1992, “Korea is an extreme case
of social welfare ‘under-spending’…. Korea’s social security effort has fallen far behind
its degree of modernization.”1 Recently, however, a growing number of scholars have
viewed Korea as a rising welfare state in Asia. Their studies highlight the effect of
democracy and the emergence of a new advocacy coalition of progressive intellectuals
and NGOs.2 According to this new scholarship, Korea seems to be following “the
general pattern of welfare state development rather than a unique East Asian pattern,”3
though it is perhaps a less-generous version of the conservative welfare state found
in continental European countries.4 Some scholars even argue that Korea could
evolve into a comprehensive welfare state,5 or into a welfare state which “has more
in common with the Nordic or Scandinavian social democratic welfare regimes than
any of the other European and Western types.”6
Indeed, the Korean welfare state has undergone enormous changes since democratization in the mid-1980s. The conservative governments’ Bismarckian response to
the political changes of the 1980s expanded the nation’s social security system, which
was first introduced under the authoritarian developmental state in the 1960s and
1970s. A power shift to progressive political forces in the aftermath of the 1997
financial crisis heralded a new era for the Korean welfare state. Korea is now equipped
with four major social insurance schemes (industrial accident, health, pension, and
unemployment) and a systematized public assistance program. The mandatory, state-
run social insurance schemes are, at least in legal terms, universal programs. New
social service programs such as child care and long-term care for the elderly have been
introduced. As Ito Peng and Joseph Wong argue, the scope of social protection
in Korea has broadened, and the institutional purpose of its social policies is no longer
subject to an economic rationale.7 In short, democratized Korea seems to have put the
development of its welfare state on the historical track of advanced democracies in Europe.
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Comparative Politics July 2013
Figure 1 Welfare State Regime by Social Expenditure and Spending Type
Notes: The horizontal line is the mean of public social expenditure as percentage of GDP of the 24
OECD countries in the figure. The vertical line is the mean of spending on family and employment as percentage of GDP. Proportion of spending on family and employment is calculated by
author from OECD SOCX data. Spending on family and employment = ALMP + working-age
cash benefit + social service expenditure. Working-age cash benefit = total cash spending (pension + survivors’ cash benefit). Social service expenditure = total service expenditure health expenditure. For a disaggregated expenditure approach, refer to Francis Castles, “What
Welfare States Do: A Disaggregated Expenditure Approach, Journal of Social Policy , 38
(January 2008), 45-62.
However, the development of the Korean welfare state should not be overrated. The
sea change in state-society relations since democratization in the mid-1980s has not
translated into rapid welfare-state building, in contrast to the catching up of Korea’s
economy with advanced economies. Currently, Korea’s per capita income is 90 percent
of the Organization of Economic Cooperation and Development (OECD) average, but
social expenditure is just about 39 percent of the OECD average.8 As Figure 1 illustrates,
Korea is an antipode of the model welfare state of Sweden. Despite Korea’s late
industrialization and its low per capita income ($31,753 in purchasing power parity,
or PPP, 2011) relative to that of Sweden ($40,613 in PPP, 2011), 9 the gap is too big
to disregard. Esping-Andersen’s observation is still valuable in many important respects.
The Korean welfare state programs are underdeveloped and dualistic in coverage.
Korea’s low social expenditure (7.6 percent of GDP in 2007) is concentrated in traditional social insurance programs such as pensions and healthcare. These two major
programs account for about 70 percent of total social expenditures, reflecting the
underdevelopment of social service programs that support families and employment.
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Jae-jin Yang
The level of benefits of existing programs is also low. The replacement rates of social
insurances are among the lowest in the OECD, and at the same time the benefits from
tax-based programs are meager. More important, the actual coverage of major social
insurance schemes is substantially limited due to large-scale contribution evasion.
Only those who have stable employment enjoy full access to the social security system.
Those who are excluded have to rely on targeted public assistance programs operating
on highly selective criteria.
Against the backdrop of these observations, this article explains the limited influence of industrialization, democratization, and the labor movement on the development of a welfare state in Korea by focusing on the dynamic correlates of enterprise
unionism, a big business (or chaebol)- dominated economy, and plurality-based electoral rules.10 The main argument is that welfare-state development in industrialized,
democratic Korea lags behind its potential because organized workers’ distributive
interests are satisfied through enterprise unions situated mainly in the affluent big
business sector, which in turn lowers outward political demand for public social welfare. The single-member-district (SMD) system sets a high hurdle for the newly established left parties and cultivates locally centered pork barrel politics rather than welfare
politics at the national level. Therefore, the Korean welfare state is small in size and
dualistic in coverage.
The methodological assumptions of this article are that causes interact and that
their effects on the dependent variables are not merely additive. Causal mechanisms
are traced by identifying the relevant actors, exploring the context they face, and
analyzing their choices.11
Political Economy of the Small Welfare State in Korea
Limitations of Existing Explanations Why is the Korean welfare state so small?
Major welfare state theories do not provide convincing answers. First, according to
the logic of industrialism, which views the welfare state as a product of both the
growing need for protection in the face of social risks (for example, unemployment
and the cost of retirement) and the new financial resources generated by industrialization,12 Korea has fertile ground for developing the welfare state. As of 2011 Korea
was the fifteenth largest economic powerhouse in the world, with a per capita income
of $31,751 (in PPP), surpassing Italy ($30,165) and New Zealand ($27,966). 13 Rapid
industrialization since the early 1960s, led by the manufacturing sector, has changed
Korea from an agrarian economy to a highly industrialized one. The heavy and
chemical industries dominate the economy, accounting for 86.5 percent of total
manufacturing output in 2008. 14 In contrast to industrial development, the Korean
welfare state is relatively underdeveloped.
Second, the theory of democracy and interest groups attributes welfare state development to a combination of the demands of interest groups and the response of politicians in competitive electoral democracies.15 In Korea a series of military dictatorships
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Comparative Politics July 2013
dampened electoral competition before democratization. Nevertheless, the first
general election was held in 1948, and elections continued during the authoritarian
regime, except for direct presidential elections which were banned from 1972 to
1986. Since 1987 when the democratic movement toppled the authoritarian regime,
Korea has had six consecutive elected governments, successfully developing into a
“fully functioning modern democracy.”16 Given the experiences of South European
countries such as Spain, Portugal, and Greece, which rapidly caught up with the
advanced Western European welfare states after the fall of dictatorships in the
1970s,17 the case of democratic Korea’s small welfare state poses a serious challenge
to the utility of the democracy and interest group theory.
In contrast, the power resources model provides a better context for understanding
the fundamental limitations on the Korean welfare state. The weak political power of
the Korean working class is no doubt related to Korea’s small welfare state. However,
this does not fully explain the dynamics of welfare politics in Korea; Korean labor’s
preferences have diverged from the standard power resources model’s general assumption that organized labor strives for greater solidarity and public welfare.
Since Korea does not appear to conform to the predictions of these general theories, some scholars have turned to more specific theses. They attribute the smallness of
the Korean welfare state to Korea-specific peculiarities, such as Confucianism and
“productivism.”18 Indeed, Confucianism is a unique cultural trait that still has significant influence on Koreans’ way of life. Compared to the Western welfare states, in
Korea adult children care for a higher proportion of the elderly and families more
often provide welfare services to the aged, children, and patients. Thus, one study
suggests that Korea has not needed a large welfare state which looks after people
from the cradle to the grave.19 However, the Confucian effect as an independent vari-
able should not be overstated. The relatively high level of welfare services provided
by families may be an outcome, rather than a cause, of underdeveloped public welfare. As Esping-Andersen rightly points out, the stylized portrait of the Confucian
welfare state sketched above holds for the past of all advanced welfare states as well.20
The proportion of elderly people living with their children was once very high in
Western countries. In the 1950s it was about 44 percent in Norway, 55 percent in
Finland, and more than 40 percent in Britain. But as the welfare state began to provide pension and care services, families’ roles declined. Thus, it is more likely that the
small welfare state in Korea keeps people clinging to Confucian ethics to relieve the
vagaries of capitalist industrialization.21
The “productivist welfare capitalism” thesis (hereafter PWC) provides a more
plausible interpretation for the small welfare state in Korea. The PWC argues that
the Korean developmental state has sacrificed welfare-state building for rapid economic
growth by subordinating social policy to economic objectives.22 The PWC directs
scholarly attention away from culture to unique features of the production system in
Korea’s rapid industrialization period. However, the PWC’s fundamental problem is
its functionalism. Almost everything unique in the Korean welfare state is reduced
to the functional prerequisites for economic development. As Moo-kwon Chung points
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Jae-jin Yang
out, this perspective does not elaborate the causal mechanisms linking specific welfare
programs to economic policy and the production system.23 In short, the PWC, rather
than a theory, is a functionalist argument which highlights some specific aspects of
the Korean welfare state.
Strengths and Limits of Power Resources Model The power resources model,
which emphasizes the roles of organized labor and social democratic parties, better
explains the small welfare state in Korea.24 No doubt, the weakness of the working
class is an underlying factor. Under authoritarian rule, the state obstructed labor
organizing and repressed workers’ collective action. Even after democratization in
1987, the power resources of labor were limited. The unionization rate remained
low (about 10 percent of the workforce), labor parties were weak (at best occupying
about 3 percent of the National Assembly), and conservatives continued to rule the
National Assembly most of the time.25 Neocorporatist tripartism, initiated by the
center-left Kim Dae Jung government during the 1997-1998 Asian financial crisis,
has become more ceremonial than functional.26 Also, neoliberal market reforms have
increased dualism in the labor market, undermining the solidarity of the working
class. Therefore, it is not surprising that Korea lags in developing a welfare state,
as the power resources model predicts. This model appears to provide a parsimonious explanation for Korea’s welfare state development.
However, as mentioned above, what is peculiar in Korea is not only the weakness of organized labor, but also the fact that organized labor has not noticeably
fought for a welfare state. Despite its notorious militancy, organized labor rarely
participates in the social movement to build the welfare state. The current Korean
welfare state reflects not only the limited power resources of organized labor, but also
its strategic choices over time. This phenomenon is not limited to Korea. For instance,
Jon Gal and David Bargai offer a similar interpretation regarding Israel, where labor
strength is not positively correlated with greater public responsibility for social welfare.27 Israeli workers hold onto traditional preferences for fringe benefits within the
workplace, rather than advocate for state intervention. This is why there is no linear
correlation between labor clout and public commitment to social welfare in many
developing countries, where organized labor has often had a regressive effect on the
construction of welfare states.28 As Stephan Haggard and Robert Kaufman pose the
comparative research question, it is necessary to study “the circumstances under
which the interests of labor have progressive or regressive effects for social policy
as a whole.”29
The standard power resources approach fails to provide adequate answers to this
question because “there is absolutely no compelling reason to believe that workers
will automatically and naturally forge a socialist class identity; nor is it plausible
that their mobilization will look especially Swedish.”30 Thus, rather than simply
assuming that organized labor pursues class solidarity and social welfare as a means
to achieve it, a growing number of studies point to the variation in the objectives of
organized labor, particularly the self-interested behavior of insiders,31 the existence of
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Comparative Politics July 2013
cross-class alliances,32 and different responses by organized labor to similar challenges of globalization and postindustrialization.33
Therefore, while sharing the assumptions of the standard power resources model,
this article specifies further the social policy preferences of organized labor and two
related key actors of the welfare state, employers and politicians.
Institutional Power Resources Model: Theoretical Argument
for the Underdevelopment of the Korean Welfare State
The standard power resources model is enhanced by synthesizing the institutional
effects on welfare politics which emanate from both the demand and the supply
sides of the political marketplace. On the demand side, this new model focuses on
organized labor and employers who possess independent power resources: a large
number of people with the power to stop industrial production by means of strikes,
in the case of unions; and money, lockouts, and withdrawal of investment, in the
case of employers.34 On the supply side, analytical focus lies in how the rules of
the game in electoral politics discourage or encourage pro-welfare politics, including
labor’s political participation.
First, the effect of union structure on policy preferences must be considered.
Labor is not uniformly structured and has differential policy preferences in different
national contexts. Based on the logic of Mancur Olson and corporatist union politics,35
it is hypothesized that narrowly based unions (such as enterprise unions) have less
incentive than encompassing unions (for example, industrial or national unions) to
sacrifice short-term distributive gains (such as wage increases or corporate welfare)
in order to achieve long-term, universalistic gains (that is, public welfare). Leaders
of national-level trade unions, encompassing skilled professionals as well as unskilled
workers, are interested in installing a nationwide public welfare system to simultaneously satisfy material interests and advance the solidarity of the working class. In
contrast, if workers are narrowly organized at the firm level and lack the institutional
means for comprehensive negotiations at the industrial or national level, distributional
struggles, which tend to be particularistic and temporally short sighted, will take place
at the firm level. Under such conditions, advocates of universal social welfare for the
whole working class are unlikely to prevail. Instead, club goods such as high wages,
corporate welfare, and job security will be favored. This likelihood will increase to the
extent that enterprise union leadership is weak vis-à-vis their rank and file workers,
since union leaders will feel compelled to satisfy the short-term demands of the rank
and file in order not to lose their leadership positions.
Second, it is hypothesized that differences in the sensitivity to labor costs affect
employers’ policy preferences with respect to social welfare.36 The more corporate
competitiveness depends on cheap labor costs, the more employers oppose social
welfare. In contrast, affluent, large, capital-intensive firms are less likely to oppose
welfare provisions than small firms. But they prefer social policies which restrict
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Jae-jin Yang
benefits to their workers because they do not want to shoulder the extra burden for
high-risk workers in small firms who cannot afford to pay the cost. Thus, their favored
policy options are corporate welfare for their employees and social insurance programs
that restrict benefits to co …
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