A debate is heating up here over whether to provide basic income to people struggling to go through difficulties stemming from the spread of the novel coronavirus.
Basic income refers to money evenly distributed to individuals to support their livelihoods, regardless of their wealth level or job status.
The debate was ignited last month by Lee Jae-woong, an innovative entrepreneur, who proposed providing 500,000 won ($403) in universal income to people suffering hardships due to the coronavirus outbreak, via an online petition site run by the presidential office.
On the heels of his proposal, some local government heads affiliated with the liberal ruling Democratic Party of Korea have called for the introduction of what they describe as an anti-disaster basic income.
South Gyeongsang Province Gov. Kim Kyoung-soo proposed providing 1 million won of cash to each of 51 million Koreans in a drastic measure to help bolster household livelihoods and domestic demand.
Lee Jae-myung, governor of Gyeonggi Province, suggested the same amount of basic income be offered in the form of regional currency that should be spent within a certain period of time.
Seoul Mayor Park Won-soon proposed doling out gift certificates worth 600,000 won to households in the low- and middle-income brackets.
The government initially showed a negative response to the idea.
During a parliamentary session last week, Finance Minister Hong Nam-ki said it was difficult to easily agree to the basic income proposal, as there would be many problems with implementing it despite some merits.
Hong and other government officials earlier said the 11.7 trillion-won extra budget bill submitted to the National Assembly contained expenditure items that might fit the concept of basic income, though in a limited way. The additional spending plan calls for providing 2.6 trillion won in cash and consumption certificates to some 5.8 million people in the low-income bracket.
But such a negative stance is likely to be withdrawn, as President Moon Jae-in recently made remarks that could be interpreted as leaving open the possibility of introducing an anti-virus basic income.
In a meeting with economic policymakers Friday, he urged them to work out “unprecedented measures” to cope with the spreading coronavirus and minimize its negative impact on the economy. While presiding over a meeting with local government heads Monday, he suggested the possibility of drawing up another extra budget and taking additional steps to overcome the coronavirus crisis.
The indiscriminate cash payout can be a quick way of providing support for people left in vulnerable situations.
But it can be a less effective means to bolster a faltering economy hit by the virus spread amid simultaneous slumps in domestic consumption and exports. Moreover, there is no credible way to raise funds for distributing the proposed versions of basic income.
A recent study by a local research institute showed cash transfers to households would be less effective in helping increase gross domestic product than direct spending by government agencies or financial support for corporations.
People with low propensity to consume are likely to save most of the cash given to them. They might even reduce consumption spending in preparation for a possible tax increase in the future.
Despite the need to expand spending to cope with the emergency situation, caution should be taken against the rapid deterioration of fiscal soundness.
The Finance Ministry plans to issue 10 trillion won in state bonds to help finance the proposed supplementary budget, the fourth of its kind since Moon took office in 2017. As a result, the national debt is estimated to rise to a record 815.5 trillion won this year, accounting for 41.2 percent of GDP.
The national debt-to-GDP ratio is projected to exceed 45 percent if a per capita basic income of 1 million won is distributed as proposed by South Gyeongsang Province Gov. Kim.
He has suggested covering the cost of basic income payments by collecting more in taxes from high-income people and forcing large companies to chip in from their cash reserves. But these measures could be too oppressive, prompting resistance from taxpayers and further damping down corporate investments.
A survey of 1,005 adult Koreans, conducted last week, showed nearly 60 percent of respondents objecting to the idea of providing all people with 1 million won in disaster-related basic income.
It would be more realistic and efficient to focus on offering a range of specific support measures tailored for more vulnerable people, including small business owners, nonregular and daily workers.
The government also needs to push for an across-the-board cut in taxes at least on a temporary basis, which would bring the same effect of putting more cash into consumers’ pockets and help ease mounting difficulties faced by companies.
