Seoul’s income initiative boosts welfare exits, earned income

More people are leaving the city's welfare rolls while continuing recipients are earning higher incomes under the Seoul city government's Stepping Stone Income welfare initiative, according to the Seoul Metropolitan Government on Monday.

The city government hosted an international forum titled “Solutions for Alleviating Poverty and Income Disparity” on Monday at Dongdaemun Design Plaza, bringing together experts in economics, social welfare and sociology to discuss the city’s income support system and its results.

The city’s Stepping Stone Income is a selective welfare program that provides income-based cash payments for households earning less than 85 percent of the median income. Originally called the “Safety Income” scheme, Stepping Stone Income is a pilot project now in its third year, having been launched by the city government in July 2022.

As a part of the project, the city government selected 484 households earning 50 percent or less of the median income to receive the subsidies for the first phase in July 2022 and then expanded the number to 1,100 households with incomes between 50 and 85 percent of the median.

According to the city government, as of July 2024, the number of recipients who left the program in the past year rose to 8.6 percent, or 132 households in total -- which was up by 3.8 percentage points from the 4.8 percent, or 23 households, who had left the program as of May 2023.

Additionally, 31.1 percent of households receiving financial support also saw an increase in their earned income. This is 9.3 percentage points higher than the previous year’s numbers, which stood at 21.8 percent.

The city government added that it also saw an increase of 3.6 percent in those who began working since receiving benefits, which “indicates that the Stepping Stone Income welfare initiative does not reduce the recipients’ motivation to work,” according to a city government official.

Some other positive outcomes of the welfare initiative that the city government pointed out were that 72.7 percent of Stepping Stone Income recipients had invested more in education and training than other households with the same income, “which can increase labor productivity in the long run.” Some 11 percent of recipients also saved more money and spent more on essential goods such as healthcare and groceries. The city government pointed out that recipients also noted improvements in their mental health.

During a special plenary session, Seoul Mayor Oh Se-hoon sat down for a conversation with Lucas Chancel, the co-director of World Inequality Lab and sociology professor David B. Grusky from Stanford University for more discussions about the outcomes of the city's welfare program and ways to improve it.

Grusky added that to reduce inequality, increase economic safety and to release people from the poverty trap, people must “be able to afford high quality, early childcare that has long payoffs.”

“By investing in human capital and education, the children who benefitted from such welfare initiatives will grow to have more stability in terms of their health and education, and can therefore play adequate roles in society when they become adults,” said Grusky.

Oh also expressed his desire to expand the city government’s income initiative nationwide by late next year.

“(The Stepping Stone Income welfare initiative) has proven to produce positive and significant results by raising the recipients’ incomes and motivating more people to work,” said Mayor Oh. “We plan to build more on the initiative based on its current performance and expand it into a nationwide program.”

To safely expand the city government’s welfare initiative, Chancel mentioned that “outside perspectives” are important for stakeholders to consider.

“External researchers and outside perspectives, like this forum today, should look at the policy and conduct more dialogue regarding the initiative with the administration and also with policymakers and the research team.”