Universal Basic Income and Universal Social Insurance: A Proposal for Two-Tiered Social Security for All

There are inherent problems in today’s social security based on social insurance and social assistance. Social insurance schemes often create disincentives for hiring regular workers in the formal sector by imposing high non-wage labor costs to employers, aggravating labor market dualism. Social insurance programs that rely on employees’ and employers’ contributions cannot work for increasing number of precarious workers for whom the boundaries between employment, unemployment, and inactiveness are blurred. Social assistance divides people into the tax-paying and welfare-receiving classes, producing suspicion and stigma between them. It typically imposes high effective marginal tax rates on the recipients, reducing their work incentives and trapping them in poverty.

To solve the problem of double dualism in both labor markets and social protection, I propose a two-tiered social security system that combines universal basic income(UBI) and universal social insurance(USI). UBI will be financed by general tax revenue, while USI will be financed by a flat-rate tax on any source of income of individuals and profits of corporations instead of employer contributions. UBI will replace social assistance, providing some amount of monthly income to every resident of the country, accompanying the duty of paying taxes to prevent free-riding. USI will provide health care and cash benefits to those who have lost earnings to a considerable degree for whatever reasons. The amount of benefits will be proportional to their previous contributions, removing redistributive function and thereby any room for moral hazard. 

“Hidden Evidence for Significant Employment Effect in the Finnish Basic Income Experiment”

The official “preliminary results” report (February 2019) for the two-year Finnish basic income experiment stated that there was no significant employment effect from the first-year register data, which prompted some media and commentators to hastily declare the failure of the experiment. However, I find unpublished evidence for significant employment effect from the second-year survey data. The evaluation study group noted the concern on self-selection bias in the survey data, in response to my inquiry about the reason for their decision to not report this survey evidence. However, this concern should apply to wellbeing effects as well.

Transforming Income Tax Deductions and Credits into Basic Income and Labor-Participation Income, with Application to South Korea

Many countries provide income tax deductions and credits for taxpayers, such as basic deduction and/or credit, earned income deduction and/or credit, and deduction and/or credit for dependents. These deductions and credits are often regressive so that the actual amounts of tax relief are greater for the high-incomers than for low-incomers. In particular, deductions are very regressive because the same amount of income deduction results in higher amounts of tax reduction for higher-income taxpayers who face higher marginal tax rates. Hence, reform of tax allowances such as deductions and credits have been proposed as a way to finance basic income. However, in some countries such as South Korea and Japan that provides considerable earned income deductions as well as earned income tax credits for workers, transforming them into basic income may face opposition from workers. In such circumstances, we could consider transforming them into a labor-participation income while transforming basic personal deductions for taxpayers themselves and their dependents into a basic income. We expect that such reform will considerably reduce income inequality and poverty. We will conduct a microsimulation of distributive effects of such a scheme in South Korea, using income tax statistics data and micro data from a nationally representative household survey. We will also discuss policy implications for other countries.


Feasibility of Universal Basic Income in South Korea in Comparative Perspective (with Nam Hoon Kang and Seungju Lee)

The book explores the moral case and the financial and political feasibility of introducing universal basic income (UBI) to supplement or partly replace the current welfare regime in South Korea in comparative perspective. It discusses the moral case for UBI in terms of human freedoms and wellbeing as well as different conceptions of distributive justice. It assesses the conditions of the growing precariat in dualized labor markets and ineffectiveness of the dualized welfare regime to help the poor and the precarious to enjoy human freedoms and wellbeing. It examines two models of UBI in terms of financial feasibility and effectiveness in reducing inequality and poverty and enhancing human freedoms: a full UBI that could replace the existing social assistance system (National Livelihood Guarantee Scheme) and a partial UBI that could supplement the current system. It also explores the politics of UBI in South Korea and considers political and financial strategies in comparison with other rich and poor states.

Tentative Table of Contents
1. Why Do We Need a UBI?
2. Paradoxes of UBI: Economics of Efficiency and Equity
3. Lessons from UBI Experiments and Pilot Programs in South Korea, India, Finland and Elsewhere
4. Financial Feasibility of UBI in South Korea and Other Countries
5. Political Feasibility of UBI in South Korea and Other Countries
6. Conclusion: Comparison of the Korean Case with Rich and Poor Countries

Inequality, Corruption, and Trust in South Korea in Comparative Perspective

The book explores how inequality affects corruption and how inequality and corruption influence trust, including social trust (generalized interpersonal trust) and institutional trust. After reviewing the relevant literature (Rothstein 2011; Uslaner 2008), including the author’s earlier works (You 2012; 2015; 2016; 2017; 2018), it presents a theoretical framework incorporating both macro- and micro-level factors based on a behavioral approach to the rational choice theories of principal-agent and collective action (Ostrom 1998). It proposes that high inequality undermines democratic accountability mechanisms and increases corruption by fuelling policy capture by the elite and/or electoral clientelism. It also maintains that inequality and corruption increase people’s perceptions of unfairness, thereby eroding both interpersonal and institutional trust. It also suggests that low levels of social and institutional trust make it difficult to reduce inequality and to curb corruption, both of which require high levels of collective action capacity of the citizenry, particularly in democracies. Thus, there can be both virtuous cycles of equality, integrity, and trust and vicious cycles of inequality, corruption, and distrust.
The book tests these hypotheses through cross-national and individual-level analyses of survey and experimental data and a historical investigation of South Korea.

Tentative Table of Contents
1. Puzzles
2. Theory: Inequality, Corruption, and Trust
3. Inequality and Corruption in Democracies and Dictatorships
4. Multilevel Analysis of Interpersonal and Institutional Trust
5. Inequality, Chaebol Concentration, and Capture in South Korea
6. Interpersonal and Institutional Trust in South Korea
7. Conclusion


KSPS-Gachon Korea Inequality Research Lab (KIRL)

Launched in December 2018, with a generous five-year grant (December 2018-December 2023) from the Korean Studies Promotion Service (KSPS) at the Academy of Korean Studies, the KSPS-Gachon Korea Inequality Research Lab (Director Jong-sung You, Mentor Stephan Haggard) is committed to developing new theories and empirical findings on the causes and consequences of inequality and proposing alternative social policies.

For this purpose, the lab promotes collaborative research among 15 top-level domestic and international scholars. Based on the multidisciplinary approach in the fields of economics, politics and public policy, the lab conducts comparative studies of inequality, focusing on Korea. The lab aims to place Korean studies at the center of new cutting-edge research on inequality, comparing Korea with neighbouring East Asian countries such as Japan and Taiwan and the Western advanced welfare states.

Seoul Institute – Gachon University Collaborative Research on Income Distribution in Seoul Using the NHIS Big Data

We have been exploring the possibility of using the full-population panel data (2006-present) on income and real estates compiled by the National Health Insurance Service(NHIS) in the study of income and wealth distribution in Seoul. We find that the administrative big data has been improving in capturing personal incomes, although the data cannot construct disposable income because of its lack of information on taxes and transfers and lacks some important information on market income such as daily laborers’ wages and financial incomes (interests and dividends). The NHIS is expected to be able to provide information on daily laborers’ wages and financial incomes in the near future. We are also working to link the NHIS data with other survey and administrative data such as the Survey of Household Finance and Living Conditions(SHFLC) and the employment insurance data. We have played a leading role in creating the Administrative Data Research Network-Korea(ADRN-K), which aims to facilitate the use of administrative data in social science and policy research.

APSA Working Group on Inequality and Social Policy in East Asia

The APSA Working Group on Inequality and Social Policy in East Asia  (Chair: Jong-sung You) aims to facilitate comparative and collaborative research on the politics and political economy of inequality and social policy in East Asian countries. The Working Group convenes during the annual meetings of the American Political Science Association.

The Working Group is supported by the Korea Inequality Research Lab, and is affiliated with the APSA Class & Inequality Section.