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Gyeonggi Province sets example for universal basic income

Gyeonggi Province Gov. Lee Jae-myung announces a basic income program designed to help residents and local businesses weather the impact of the coronavirus outbreak on March 24 at the provincial government building in Suwon. (Gyeonggi Province)
Gyeonggi Province Gov. Lee Jae-myung announces a basic income program designed to help residents and local businesses weather the impact of the coronavirus outbreak on March 24 at the provincial government building in Suwon. (Gyeonggi Province)


When Gyeonggi Province Gov. Lee Jae-myung first brought the idea of universal basic income to South Korea’s political arena years ago, it was quickly dismissed as too far-fetched and populist.

Now, the COVID-19 crisis put the universal basic income -- periodic cash payments to all citizens -- high on the agenda on both sides of the political aisle after the government’s one-off cash payments during the height of the virus crisis received widespread public support.

Lee was among the first municipal leaders to vocally call on the central government to hand out cash reliefs not only to help support citizens but also to revitalize economy hit hard by the pandemic.

In May, the central government doled out virus relief funds to all Koreans and foreign nationals, ranging from 100,000 won to 400,000 won, depending on the size of the household.

On top of the funds offered by the central government, a handful of local governments pushed for a separate subsidy plan -- some selectively for low-income earners and others for every citizen. This made all individuals with a registered address in Gyeonggi Province receive an extra 100,000 won.

The first-ever direct cash payments made nationwide were relatively well received.

A survey conducted in June showed that 48.6 percent of respondents had approved of a universal basic income to “guarantee a minimal level of livelihood.” Some 42.8 percent opposed it, citing that it could pose a financial burden to the state budget and increase taxes, according to a recent survey of 1,881 people aged 18 and over by local pollster Realmeter.

In Korea, the idea of a basic income has been floated for a decade as one of the policies to tackle a widening income inequality by redistributing prosperity and to guarantee minimal living standards for all.

But it is only recently that the debate on whether, how and when it should be implemented gained momentum, after Lee first introduced the youth allowance program in 2016 as the mayor of Seongnam, Gyeonggi Province.

After winning the Gyeonggi Province governorship in 2018, Lee expanded his income stipend experiment for the youth across the province in 2019 by launching the Youth Basic Income – the world’s biggest such experiment in terms of sample size.

Gyeonggi Province, which encompasses 31 cities or counties surrounding Seoul, is home to a fourth of the country’s population with 13.35 million residents as of 2019, according to the Ministry of Interior and Safety.

Under Gyeonggi Province’s Youth Basic Income program, all 24-year-old citizens who have lived in Gyeonggi Province for three consecutive years or who have lived in the province for more than 10 years in total are given 250,000 won in the form of “local currency” every quarter for a total of 1 million won over the course of one year. No conditions -- such as job-search efforts or parental income levels -- are attached. The number of recipients stands at around 150,000 people, according to the Gyeonggi provincial government.

According to surveys conducted in July and November 2019 by the Gyeonggi Research Institute, 80.6 percent and 82.7 percent of the youth recipients, respectively, said they were satisfied with the program. It generally helped the young recipients to improve their quality of lives, to have more trust in politics, law and fellow citizens, the institute said.

For Lee, his basic income program is more than a welfare policy. It is the centerpiece of his vision to make Korean society more equal and just for all. It is also a key policy to sustainably spur economic growth in the era of Industry 4.0.

At the core of his basic income scheme is “local currency” which can only be used at traditional markets, restaurants and shops in Gyeonggi Province, not at franchise stores and supermarkets run by conglomerates. This is to help small and medium-sized businesses and in turn boost the local economy.

There was a notable change in consumers’ spending patterns from the use of the local currency, shows a poll carried out in May by the Korea Research on 1,000 residents in Gyeonggi Province. Some 80 percent of the respondents said they had gone shopping at local shops, not at large supermarkets they had frequented.

The shops and restaurants that accepted the local currency saw their sales increase by 53.6 percentage points, compared to those who did not, according to the Gyeonggi Research Institute’s analysis on the impact of the cash relief during the COVID-19 pandemic.

In the latest move to further experiment with the universal basic income, Lee is pushing to introduce a farmer-specific program – offering a certain amount of local currency to all farmers on an individual level and on a regular basis.

It is considered more similar to a universal basic program in that it seeks to offer cash payments to farmers for a longer term to help the farmers’ livelihoods, which is different from one-off, temporary programs such as coronavirus-fueled cash handouts.

As for the funding, the governor suggests the government levy more taxes on the real estate market, where he says speculation has fueled price hikes, yielding proceeds to homeowners. For example, 1 percent of the local taxes collected by municipalities could be used as a source of funding, he said.

“At the center of the global problem of low economic growth is a shortage of consumption demand, inequality and (the wealth) gap,” Lee said at a founding ceremony of the Basic Income Research Forum held at the National Assembly on July 30. “We have focused on supplying, but we are living in the era where increased supply does not guarantee a rise in consumer spending,”

“Now, the government’s role should be focused on enhancing consumers’ spending capacity,” he said, adding that the basic income realistically benefits its recipients as well as tax payers by growing the size of economy.

Meanwhile, the 2020 Basic Income Exhibition, led by the Gyeonggi Provincial Government, will be held online from Sept. 10-11. A renowned economic and social theorist, Jeremy Rifkin, who authored several bestselling books including “The End of Work,” are to be invited for one-on-one talks with Lee at the exhibition.

By Ock Hyun-ju (laeticia.ock@heraldcorp.com)
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