The national government of Korea has been endeavoring to better support the livelihood of low-income individuals. In this regard, it has introduced a system called the National Basic Livelihood Security System (NBLSS) in 2000. The system provides financial support to the poor whose earnings are less than minimum cost of living. Later in July 2015, the government has undertaken the system reform. In the process, two significant changes have been made: First, the national government has expanded the scope of beneficiaries (refer to <Figure 1>). Second, it has adjusted the allowance payment method (refer to<Figure 2>). Previously, the beneficiaries of NBLSS were selected based on one criterion – that is, whether their income can cover minimum cost of living. Once they were accepted, they all received the same amount of allowance. After the reform, the national government now determines who receives the allowance by weighing multiple factors. Instead of taking only livelihood into account, it looks at other areas of needs such as medical care, housing and education. In other words, it pays a wider range of people with varied financial needs. Still NBLSS does not attend to everyone in pecuniary difficulties. This is why the Seoul Basic Security Scheme (SBSS) has been implemented. It supplements income of the poor who are ineligible for NBLSS, yet greatly suffer from poverty. In this sense, two systems are closely related to one another.

As a result of the NBLSS reform, a slightly greater number of Seoul citizens are now NBLSS beneficiaries. SBSS should accordingly adjust the scope of its beneficiaries and how it secures their livelihoods.

This study has utilized the data from the welfare-related database managed by the national government. It has applied the new extended beneficiary selection criteria of reformed NBLSS. The result shows that maximum 30.7 percent of Seoul citizens who were previously found ineligible for NBLSS would now be accepted according to new criteria : 22.1 percent comes from people who qualify for livelihood assistance; the rest 8.6 percent is represented by new recipients of medical care and housing support.

NBLSS declined the application of 15,175 families each year from 2012 to 2014. If those applicants all reside in Seoul, 4,569 of them would be embraced by the system in accordance with its new beneficiary selection criteria.
 

SBSS ought to change in response to the NBLSS reform. In particular, its beneficiary selection criteria need to be adjusted to better find a blind spot where the poor are being neglected. This report urges the Seoul Metropolitan Government (SMG) to improve the system in the following two directions.

 

First, remove inappropriate elements from the current beneficiary selection criteria. This would raise the beneficiary selection rate, meaning the system can help more citizens in financial hardship. At the moment, the SBSS requires its beneficiaries to qualify for all six criteria – if one wishes to receive the allowance, he or she must satisfy a set of requirements for income, asset, financial asset and car ownership categories. Moreover, their caregivers such as family members who have a legal responsibility to support them also need to meet income and asset requirements. This multi-dimensional criteria certainly reduce the chance of people getting accepted by the system. There lies another problem. That is, the requirements related to car ownership and financial asset overlap.

Second, serve the fundamental purpose of the SBSS. SMG has designed and installed the system in pursuit of addressing the problem with the NBLSS: It applies utterly tight criteria to legal caregivers of its beneficiaries. Further, it pays the equal amount of living allowance to all the beneficiaries across the country. In other words, the system fails to recognize that price level in each region varies. Consequently, some impoverished people end up being neglected in blind zones. This is basically why the SMG has created the SBSS in the first place: To help the poor neglected by the NBLSS. The national government should concentrate on serving this very purpose.
 

Following the directions of changes suggested earlier in this report, the SMG should (1) ease the beneficiary eligibility requirements, (2) adjust the baseline beneficiary household income to represent the exact median Seoul household income, and (3) relax the optional criteria. This study has drawn 13 options for system adjustment in three aforesaid areas of change (refer to <Table 2>). It has been discovered that the selection rate increases by applying each adjustment. More people will receive the benefit provided by the SBSS when each adjustment is applied to the system.

From various combinations of 13 options, we propose herewith the final draft for the adjustment of the SBSS beneficiary selection criteria (refer to <Table 3>). It suggests easing the income requirement that the beneficiaries must comply with. It also recommends increasing the baseline value of financial assets from 10 million to 15 million Won. Another significant change proposed here is the removal of beneficiary requirement regarding car ownership.

Not every eligible beneficiary family lives in Seoul. Therefore, it is inappropriate for the SBSS to have the median Seoul household income as the baseline value for its income requirement. Yet taking out such a requirement would not be understood nor accepted by most Koreans. Experts argue that this also poses a problem: The beneficiaries of the SBSS would receive a larger amount of allowances than the relatively poorer beneficiaries of the NBLSS. Many would certainly argue that this is unfair.

In regards to the optional criteria, this report proposes raising the baseline value of financial asset requirement. In addition, we believe in the feasibility of removing beneficiary requirement related to car ownership: Most of ineligible beneficiaries do not own cars. Even they do, their cars are not worth much.

NBLSS reduces the amount of allowance it pays to its beneficiaries when their earnings rise. In the case of the SBSS, it has three income brackets. The system pays its beneficiaries the equal amount of allowance according to which bracket they belong to. This means that even if a beneficiary earns a greater income than others in the same income bracket, he or she can still receive the same amount as long as they stay in the same bracket. Thus, they may find the current scheme beneficial. However, it embodies a problem: A beneficiary receiving the most in the first income bracket may end up having greater earnings than the one receiving the least in the second income bracket (refer to <Figure 3>). This is called “income reversal.”

Various options are anchored in the analysis of numerous data. Yet imperfect features have been found in the data. Besides multiple factors that are not visible in the data affect the beneficiary selection process in reality. In this regard, we strongly suggest that the SMG draw a final plan for the SBSS improvement by weighing every relevant factors. It should also utilize every available information and skills in the process – the result of data analysis, information on the actual progress of system improvement and practical judgment.
 

When the SBSS was being first designed, the NBLSS then had a fixed amount of allowance. Thus, it was not complicated to select its beneficiaries. But now, it has a different amount set for each assistance category. In response, numerous experts have raised questions about who should be added to the pool of the SBSS beneficiaries. Some argue that the system must embrace every family that is ineligible for the NBLSS. Their argument rests on that the system should focus on serving its fundamental purpose: protecting the livelihood of Seoul citizens. Others contend that the SBSS should not accept households receiving any other kinds of government assistance.

There are some issues with the allowance amount and the way the SBSS pays it. The system must ensure that its beneficiaries are selected based on fair criteria. It needs to make sure that no doubts or questions about the validity or fairness of beneficiary selection process are raised by either beneficiaries of NBLSS or SBSS. If the SBSS accepts too many people for its beneficiaries, it will conflict with the NBLSS. If it embraces too little, on the other hand, it will fail to help people maintain a basic standard of living.

『Welfare Standards of Seoul Citizens』, which is the declaration on welfare for Seoul citizens, rules that any citizen of Seoul should be guaranteed a basic standard of living. Thus, the SBSS should pay its beneficiaries more than 50 percent of the NBLSS allowance – the NBLSS pays 70 percent of the minimum living cost. Yet one must question whether it is really appropriate to support the poor by increasing the cash payment through the SBSS. Securing a basic standard of living falls under the responsibility of the national government. If SMG provides greater financial support, confusion about the role of the national and local governments may arise. This may widen the gap between Seoul and other municipalities in the country.