National Minimum Income Guarantee Law and

the Trade Union

Federation of Korean Trade Union Research Center

This study is an attempt to form the labor union policy to utilize the new law, "National Minimum Income Guarantee (NMIG)."  The law legislated in August 1999, will provide modernized social assistance to the needy households replacing old law "Poor Protection Law".  Facing massive unemployment, Korean safety net could not meet the challenge properly.  Unemployment insurance was overwhelmed by the soaring unemployment rate and government policy on the unemployment could not be effective due to the improper information on the unemployed.  Under these circumstances, trade unions and social movement organizations formed an alliance and called for the overhauling old social assistance system and as a consequence, the new law was legislated in the August 1999. However, the law is not completed yet; even though it is effective as of October of year 2000 but enforcement regulations and ordinances are not set up yet.

Labor union has strong interest in this law because it is supposed to help the poor people with the labor ability that are the prospective labor union members. This contains an article that is a partial unemployment assistance.  This law has a potential to define the future of the policy on the unemployed.  It is very critical moment; the law is not fully setup yet, therefore, the engagement of the labor union at the beginning is important.  This study tries to show how labor union participate in practicing the law based on the analysis on the previous law related to help poor and research on the other countries practicing similar laws earlier.

Chapter 2 reviews the blind spots and problems of the old social safety net revealed by the increase of the low income unemployed households.  Chapter 3 shows the problems of the government policies, an old social assistance system, on the poor and low income unemployed.  Chapter 4 reviews the content of the new social assistance system and Chapter 5 seeks the ways to make new one more feasible based on the comparative studies on the other countries earlier experience.  Chapter 6 displays the relationship between NMIG and income guarantee policy for the unemployed, especially it shows the limit of the NMIG and blind spots remained even after new policies introduced including NMIG.  It also discusses the ways to fix the expected problems.  Suggested major policies are the improvement of the Unemployment Insurance as primary safety net and introduction of the substantial minimum guarantee and partial fringe benefit system to the NMIG to remove blind spots.

Research identifies following issues for the effective practice of NMIG. 

1. It is essential to find a method to measure the income and property of the welfare benefit applicants to reduce illegal recipients.  This is not only important for the NMIG but also required for the medical insurance and National Pension Insurance.  For the social justice and for the benefit of the workers, labor union should demand for the more accurate and transparent method to measure income of all prospective recipients.

2. It would be very naïve to assume that NMIG cover the persons under the poverty line omitted by the Unemployment Insurance.  The primary purpose of the social assistance is to reduce the persons without proper income, therefore, it will guarantee the minimum living standard for the people under the extreme poverty who has not been the target of any policy.  It will also cover the poor people who are excluded from the poverty policy because they have small property that did not help them escape from the poverty.  Those who not covered by this law are; the low income unemployed slightly above the minimum income but still experiencing extreme poverty and low income workers who experience sporadic employment and unemployment together.

3. Review on the other countries reveals that three level social safety net system (unemployment insurance, unemployment assistance and social assistance) is more efficient to reduce poverty rate than the two level social safety net system (unemployment insurance and social assistance).  It also shows that active labor market policy is crucial to reduce the poverty.  These facts indicate that introduction of the unemployment assistance and its combination with active labor market policy is the right policy direction to fight against poverty in the era of low-growth and high-unemployment.  Many countries in the review however combine unemployment assistance and social assistance to reduce excessive welfare expenditure and apply active labor market policy to the welfare recipients.

  Connecting social assistance to the labor market program is more effective with   change of social assistance system and other policies to avoid the trap of   unemployment, poverty and dependency.  Therefore, future of NMIG depends on   the building of the social assistance system to reduce poverty, supplying the   feasible labor market program for the poor, and simultaneously expanding job   security service and infrastructure of social welfare system.

4. Even though it is evident that Unemployment Assistance is needed, considering the fact that Korea have just introduced NMIG after overcoming many obstacles, the introduction of the new law is not expected in near future.  The alternative policy to patch the problems of the current welfare system is to cover irregular workers by the Unemployment Insurance and to apply positive labor market policy to the persons with labor ability covered by the NMIG.  Specifically, followings are required. (1) combine current individual, special and training extension of unemployment benefit that are very similar to the unemployment assistance into a fixed amount of the income maintenance benefit  (2) Part of financial assistance for the shorter working hours, maternity leave and on the job training should be shared by the workers, not only by the employers  (3) Public Work Program, job training and aid for the inauguration of the enterprise that are part of temporary anti-unemployment program in 1998 and 1999 should be incorporated into regular program to fight against unemployment  (4) More dialogue and cooperation is needed between local labor office officers in charge of anti-unemployment administration (under the control of Department of Labor) and local government social workers to provide poor the financial assistance and labor market accessibility.
 

Final remark of the study is that no country with full social safety net can cope with continuing massive unemployment.  In principle, the best policy against unemployment is creating and sustaining jobs.  The task of labor union is, therefore, to analyze labor related policy and program to modify them to provide proper social safety net for low-income workers and unemployed to escape from poverty and unemployment without welfare dependency.