A Study on Income Support Policy for the Working Poor

• Published in: Policy File 2018
• Main Author: Lee, Youngwook
• Format: Report
• Language: Korean
• Subjects: Economic policy; Government; Korea Development Institute; Labor force/Employment; Poverty; Welfare

The purpose of this study is to analyze the working poor and evaluate the current income support programs in order to derive the policy implications of income support policies. The policies, which target the working poor, have two possibly conflicting policy goals; to support income and encourage work. As such, an accurate assessment of the working poor and current policy effects is needed to design the policy. The problem of in-work poverty is serious among the elderly. Accordingly, a large portion of the working poor are from households without spouses and children. This is a different pattern from other countries where in-work poverty is severe among families with children. This study also evaluates the effects of two income support policies including the working poor as recipients, the Earned Income Tax Credit(EITC) and Basic Livelihood Security Program(BLSP) from the perspective of income support and self-reliance support. The main findings can be summarized as follows. First, the poverty reduction effect of the BLSP benefits is much greater than that of the EITC. The main beneficiaries of the BLSP are the elderly in households without children, but the EITC is primarily for households with children. Second, the presence of workable persons in a household increases the likelihood of leaving the BLSP. However, self-reliance programs within the BLSP have a negative impact on their exit from the welfare program. Third, the EITC expansion, which includes seniors without spouses and children, increases the labor force participation rate of the elderly. The findings suggest that the target of the income support policy should be set based on an assessment of the current conditions of the working poor. In particular, the policy target for the EITC, a major support program for the working poor, should be readjusted and benefits should be expanded for households without children and spouses to support the elderly who live in severe in-work poverty. Also, programs to support self-reliance should be strengthened along with income support programs. The BLSP, which encompasses those who can and cannot work, has a fundamental limitation in promoting work. The design of a separate income support policy that interacts with active labor market policies may be necessary to support the working poor.