The effectiveness of poverty reduction and the target efficiency of social security transfers in South Korea, 1999-2003

The purpose of this study was to investigate the impact of social security transfers between 1999 and 2003 in South Korea, the period during which the Asian economic crisis of 1997 occurred. The study used a secondary data set, which is part of the Korea Labour Panel Data. Of 5,000 original household samples, the results for the 2,728 households (54.6 per cent) that completed the surveys for all five years studied were analysed. One finding was that the average percentage of social security transfers appeared to be nominal, as was the 1.9 per cent in 1999, which grew to 2.4 per cent in 2003. Another finding was that the average poverty-reduction effectiveness for the five-year period was as low as 7.9 per cent, indicating a slightly increasing pattern. This percentage is only one-seventh to one-tenth that of Western countries. Target efficiency appeared to be 31.8 per cent. We give the following reasons to explain why the level of the poverty-reduction effectiveness of Korean social security transfers is comparatively low: the immaturity of the Korean Old Age Pension; the lack of diversity in social transfer programmes; and a cultural factor of stronger dependency on private transfers within the family structure.