Social Security of Asia
<1>

Edited by Masanobu Masuda and Jung-Nim Kim

Public Interest Incorporated Foundation

Oriental Life Insurance Cultural Development CenterTokyo, Japan

ii

Introduction
Asia draws more and more global attention with each passing year.
In terms of population, Asia has long maintained a significant presence inthe world thanks to the existence of China. In 1950, Asia accounted for 55
percent of the total global population of approximately 2.5 billion people. In
2010, Asia accounted for 60% of a total global population consisting ofapproximately 6.9 billion people. Home to 1.36 billion people, China isranked first in the world in terms of population, followed by India (second),
Indonesia (fourth), Pakistan (sixth), Bangladesh (eighth), and Japan (tenth).
Six of the ten most populous countries on earth are located in Asia. Youngpeople comprise a significant segment of the population in these countries
with the exception of Japan. However, it is expected that the population in
China and these other countries will rapidly age in the years to come, suchthat the implementation of measures to counter this aging trend has become asocietal issue.
In terms of the economy, Japan underwent a period of rapid economic
growth in the 1960s, during which time the country raised its profile as an
economic powerhouse and came to serve as a linchpin of the world economy
as the world’s second-largest economy after the United States in terms of
GDP (gross domestic product). From the 1980s to the 1990s, economic
development in South Korea, Singapore, Taiwan, and Thailand wasspectacular. The arrival of the new century saw China pass Japan to become
the world’s second-largest economy in terms of GDP in 2009 thanks to an
extended period of rapid economic growth. In recent years, India andIndonesia have also enjoyed ongoing economic growth. According to the
Asian Development Bank, Asia accounted for 27 percent of the global
economy (in terms of GDP) as of 2011. If China and India continue to
steadily grow at more or less the same pace, the continent will account for 50
percent of the global economy in 2050.
From a political standpoint, many Asian countries managed to go frombeing the colonial holdings of Western countries to becoming independent
one after another in the years after the end of the Second World War.
Nevertheless, political chaos persisted through the Korean War, Vietnam
War, and other wars, as well as the Cultural Revolution in China, coupsd’état, and other incidents of political upheaval. These days, however, China
has become a key pole in the global political order and the Association ofSoutheast Asian Nations (ASEAN) and other such organizations have
evolved into formidable forces on the global stage.
As the political chaos comes to an end and the political situation stabilizes,
the effectiveness of national economic policies and other factors causes theIntroduction ieconomy to constitute the basis of development with the result that domestic
political issues in terms of improving the lives of the people come to the fore.
The needs of the people rise for the development of social security, such as interms of welfare policies directed at children, the disabled, and the elderly;
for policies for improving lives and ensuring the health of people byenhancing coverage of medical costs and medical services; and forestablishing a pension system to provide security to retirees. In hopes of
securing the support of the people, the government promotes thedevelopment of social security programs to accommodate these needs.
Economic growth renders it possible for the people and companies to assume
the burden of taxes and insurance premiums. While compared to Western
European countries, Asian countries may be less developed in terms of thedevelopment of social security; meanwhile, particular initiatives andprograms have been deployed in recent years—especially in East Asia—asexplained in this book.
When we look back on the history of the development of social security
programs in Asian countries, it is interesting to note that these programs havebeen developing in step with the years in which the summer Olympic Games
have been held. In 1964, Tokyo, Japan, hosted Asia’s first ever summer
Olympic Games. The summer Olympic Games returned to Asia twenty-four
years later in 1988 when they were hosted by Seoul, South Korea, andanother eighteen years later in 2006 when they were hosted by Beijing, China.
The interval of two decades at which these Games have been held in Asia
reflects the time lag among these three countries in terms of the developmentof social and economic foundations and social security programs madepossible by economic growth.
In this book, an outline of social security in Asia will be provided(Chapter 1) before scholars and researchers who are knowledgeable aboutsocial security on a country-by-country basis discuss the current state ofpolitics, the economy, population matters, and other topics; the history of thedevelopment of social security programs; and the current state of and futureissues concerning social welfare, healthcare security, and pension security infive different countries: China (Chapter 2), South Korea (Chapter 3), Taiwan(Chapter 4), Thailand (Chapter 5), and Japan (Chapter 6).
This book is notable for explaining in detail the history and current stateof social security in Asian countries, particularly in East Asian countries.
While there are many books that discuss social security in the West, there are
few that examine social security in Asian countries. However, economic
growth in recent years has given rise to remarkable progress in terms of thedevelopment of social security programs in Asian countries.
In Chapter 1, the features of the development of social security programsii

in Asian countries are explored from such standpoints as population,
economics, politics, and historical changes. The theory of the recently
emerged welfare state, which has been discussed as a type of social security
in East Asian countries, will also be covered. Chapter 2 explores the state ofthe development of social security programs in China, the most populous
country in the world, in the context of a process that has seen this socialist
country become transformed into the second largest economic powerhouse in
the world through the adoption of a market economy. Chapter 3 depictssocial security in South Korea, a country where universal healthcare
insurance and pension schemes have been established and where social
security programs are evolving in new ways thanks in part to thecentralization of a healthcare insurance system and the creation of a nursingcare insurance system. Chapter 4 examines social security programs in
Taiwan, where social security programs are being developed and where
foreign laborers referred to as foreign nursing workers are fulfilling certain
roles in the fields of nursing care and childcare. Chapter 5 looks at social
security programs in Thailand, where the development of a healthcare
security system has been promoted by combining social assistance techniqueswith social insurance. Chapter 6 focuses on social security programs in Japan,
a country that managed to achieve economic growth most quickly among
Asian countries and that has become an aging, developed country due to a
declining birthrate and a growing segment of elderly people.
This book has been written to enable readers to gain an understanding of
the social security programs in these five countries and examine thecharacteristics of each of these countries from the standpoint of international
comparisons. For example, if we look at security in terms of healthcare, we
see that social insurance-based universal healthcare for the people is offeredin Japan, South Korea, and Taiwan. In contrast, Thailand approaches thisissue through a tax-based social assistance framework known as the thirtybaht healthcare program. Declining birthrates and an aging population areconcerns affecting not just Japan but also South Korea, Taiwan, and China
such that policies on children and families and the response to the question of
how the elderly will be taken care of are becoming issues that need to beurgently addressed. In connection with the question of how the elderly are to
be taken care of, a nursing-care insurance system was set up in Japan (in2000). A similar system was subsequently set up in South Korea (in 2008)
and is now being studied in Taiwan. Understandable global attention is being
drawn to what these three East Asian countries are doing with nursing-careinsurance to deal with this matter.
As the authors of this book, we would be delighted if readers expanded
their base of knowledge on social security in these five Asian countries,
Introduction iii

considered the ways in which social security ought to be implemented in the
future in countries across Asia, and used the contents of this book as
reference material for promoting international exchanges with various Asian
countries as a result of reading what we have written. Finally, we wish to
express our sincerest gratitude to Horitsu Bunka Sha for giving us theopportunity to publish this book and to Hidenaka Konishi for taking the time
to carefully edit our submission.

February 2015
Masanobu Masuda, editoriv

Table of contents
Introduction .......................................................................................................... i
Chapter 1: Social Security of Asia ..................................................................... 1
1. Diverse Asia ............................................................................................... 1
2. Asian countries and social security programs ............................................. 3
3. Economic development and the development of social security programs 7
4. Asian welfare state theory ........................................................................ 10
5. Aging populations and the future of social security in Asia ..................... 18
Chapter 2: China .............................................................................................. 24
1. Overview of China.................................................................................... 24
2. Current state of social welfare .................................................................. 31
3. Current state of healthcare security........................................................... 40
4. Current state of pension security............................................................... 43
5. Future issues concerning social security programs ................................... 48
Chapter 3: South Korea.................................................................................... 51
1. Overview of South Korea ......................................................................... 51
2. Current state of social welfare .................................................................. 58
3. Current state of healthcare security........................................................... 69
4. Current state of pension security............................................................... 78
5. Future issues concerning social security programs ................................... 85

Table of contents v

vi

Chapter 1: Social Security of Asia
Masanobu Masuda
1. Diverse Asia
According to the Kōjien dictionary, Asia is “one of the six (inhabited)
continents of earth.1 Occupying the northeast part of the eastern hemisphere,
Asia combines with Europe to constitute Eurasia. Asia covers approximately
44 million square kilometers and accounts for approximately one-third of thetotal land mass of the globe. The continent is home to approximately 3,460
million people (1995), which is equal to more than half of the global
population. Asia extends to Japan in the east, Siberia in the north, Indonesia
in the south, and Turkey and Arabia in the west.”
In this way, Asia is a massive region accounting for about a third of thetotal land mass of the globe and approximately sixty percent of the global
population (2013). The continent generally extends from 30 degrees east to
150 degrees east and from 50 degrees north to 10 degrees south and is home
to forty-odd countries. The continent is exposed to an arctic climate,temperate climate, tropical climate, and arid climate. A geographicallydiverse place, Asia comprises continental land, islands, plains, mountainous
zones, deserts, and more.
Likewise on a smaller scale, the natural environment in Asian countries
differs in various ways in terms of area, climate, and geography. Significant
differences can also be discerned in such terms as population size, politicalsystem, economic system, religion, and culture.
Geographically, Asia is generally divided into the following regions: East
Asia (which includes China, Japan, and South Korea), Southeast Asia (which
includes Indonesia, Malaysia, and Thailand), South Asia (which includes
India and Pakistan), and West Asia (which includes Turkey and Saudi
Arabia).
Table 1-1 presents figures corresponding to area, population, population
density, gross national income 2, per capita gross national income, average
lifespan, aging rate3, and total fertility rate4 for each of thirteen of twenty-two
countries situated in East Asia, Southeast Asia, and South Asia forcomparative purposes. These figures also underscore the diversity of Asian
countries.
In terms of area, China is the fourth largest country in the world after
Russia, Canada, and the United States. If we disregard India for a moment,
then China’s size—at 9.6 million square kilometers—is unrivaled by anyother Asian countries.

Chapter 1: Social Security of Asia 1

Table 1-1. Current state of Asian countries
Gross
Population
national
density
income (GNI)(persons/km2) (x 100 million
USD)

Per
capitaGNI(USD)

Averagelifespan(years)

Aging
rate
(%)

Total
fertility
rate

57,39544,900

82.6

24.8

1.4

210

66,432

4,940

73.5

9.4

1.6

125,214381

17,662

1,420

65.5

5.7

2.6

10.0

4,926

493

10,39020,870

80.9

12.3

1.2

Taiwan

3.6

2,335

649

4,772

20,574

79.2

11.6

0.9

Thailand

51.3

6,701

131

3,083

4,440

74.1

9.8

1.6

Philippines

30.0

9,839

328

2,097

2,210

68.8

4.4

3.1

Indonesia

191.1

24,987

131

7,127

2,940

69.3

6.4

2.1

Vietnam

34.9

9,168

253

1,111

1,270

75.1

5.6

1.8

Malaysia

33.1

2,972

90

2,530

8,770

74.3

5.3

2.6

Singapore

0.07

541

7,577

2,226

42,930

81.9

8.1

1.2

Myanmar

67.7

5,326

93

553

1,144

65.2

5.2

2.0

Cambodia

18.1

1,514

84

117

820

63.0

3.9

2.5

Area
(x 10,000
km2)

Population(x 10,000
persons)

Japan

37.8

12,639

334

China

959.7

138,557

India

328.7

South
Korea

Note: Economy-related figures are generally presented as of 2011. Population-related figures are generally
presented as of 2013.
Source: Produced by the authors based on Data Book of the World 2014 (Ninomiya Shoten 2014).

China and India rank first and second in terms of population, at 1,385.77
million people and 1,252.14 million people, respectively. These two countries
together account for a bit more than a third of all the people on earth. Indonesia
ranks fourth with 249.87 million people and Japan ranks tenth with 126.39
million people. With Pakistan ranking sixth and Bangladesh ranking eighth,
Asia has six countries that come in the top ten most populous countries in theworld. Indeed, Asia is an exceedingly populous region.
In looking to economics, there were many countries outside of Japan thatwere regarded as lesser-developed countries given their status as colonies of
the Great Powers of the West from the nineteenth century to the Second World
War in the middle of the twentieth century. From the middle of the twentiethcentury, however, Asian countries drew much attention with the emergence of
rapidly developing economies.
After the Second World War, Japan experienced spectacular economic
growth primarily during the 1960s. In 1968, Japan’s gross national product(GNP) surpassed the GNP of Germany. Japan thus became the second largest
2Western5 economy in the world after the United States and came to be referred
to as an economic powerhouse. From the 1980s to the 1990s, four countries
and regions—South Korea, Taiwan, Hong Kong, and Singapore—underwent a
remarkable process of economic development and came to be described in anOECD report as newly industrializing economies (NIES). These four countries
were also known as the Four Asian Tigers and garnered the attention of theentire world. Among them, South Korea became the second Asian country
after Japan to join the OECD. The country is now a leading developed country.
In the 2000s, China’s economic growth has been breathtaking. In 2009,
China overtook Japan in terms of gross domestic product (GDP) to claim the
mantle as the second-largest economy in the world after the United States. The
growth rate of India’s economy is also large. China and India—together with
Brazil, Russia, and South Africa—are referred to as BRICS, a collective label
attached to these five major national economies. The economic growth rates in
the countries of the Association of Southeast Asian Nations (ASEAN)6—ledby Thailand and Indonesia—are also notable.
In looking at per capita income, however, we see that per capita income in
China is presently about 5,000 dollars, a tenth of per capita income in Japanand half of the 10,000 dollars per capita income level that must be met for acountry to be described as an economically developed country. Per capita
income in India is even lower at approximately 1,400 dollars. The countries in
the above list that are classified as economically developed countries forhaving per capita income exceed this 10,000 dollar level consist of Japan,
Singapore, South Korea, and Taiwan. On the other hand, the country on thislist that is classified by the United Nations as a least developed country forhaving per capita annual income fall short of 1,000 dollars is Cambodia (Table
1-1). Other unlisted Asian countries that come under this classification include
Bangladesh and Nepal. In this way, the economic gap among Asian countries
is huge.
2. Asian countries and social security programs
A social security program is defined as a program that “guarantees thatpeople can lead healthy lives with peace of mind by broadly providing benefits
through public bodies to the people to cover situations that individuals finddifficult to cover on their own through accountability and independent efforts(risks).”7
In breaking down the framework of a social security program, we see thatsuch a program is one by which a local government or other such public bodyprovides benefits in terms of services or cash to the people or residents
according to an applicable legal system with funding derived from taxes or
Chapter 1: Social Security of Asia 3social insurance premiums. Specific examples of such programs include thefollowing: pensions; social insurance to cover medical treatments,
unemployment, industrial accidents, and other such contingencies; public
assistance to guarantee a minimum standard of living; and social welfare to
support the lives of the elderly, physically handicapped persons, children, andother vulnerable persons.
As explained in the 2012 edition of the White Paper on Labor and theEconomy in Japan,8 social security from an individual’s point of view functions
as a social safety net with a view to providing stability to people’s lives andpeace of mind whenever people fall ill, become unemployed, grow old, orotherwise are deprived of the conditions that allow them to live independently.
From a society’s point of view, the transferring of income between individuals
and generations allows for the elimination of wealth disparities, enables income
redistribution that serves to stabilize the lives of low-income people, andfunctions to distribute risks in a way that permits society as a whole to provide
for situations that cannot be dealt with by individuals on their own throughaccountability and efforts. Social security also functions to stabilize society
and promote the stability and growth of the economy by way of the promotionof social consolidation and the promotion of economic stabilization and job
creation.
The provision of benefits by social security programs through public bodies
refers to the development of legal systems concerning social security by thenation (government).
In examining world history, the development of social security programs in
the form of public-assistance programs by nations began with measures to help
low-income people through the enactment of the English Poor Laws between
the seventeenth and nineteenth centuries. The development of social security
programs in the form of social-insurance schemes began with social-insurance
schemes set up under health insurance laws developed under the guidance ofOtto von Bismarck in Germany in the second half of the nineteenth century.
In accordance with the 2012 edition of the White Paper on Labor and theEconomy, we put together Figure 1-1 to provide an overview of the backdrop
against which the development of social security programs was promoted in
the Western European countries of Great Britain and Germany. The formationof an industrial-capitalist society that grew out of the Industrial Revolution in
Great Britain in the second half of the eighteenth century and thetransformation in families and local communities that sprung from thisformation are closely tied to the development of social security programs at anational government level.

4Figure 1-1. The relationship between the formation of modern
society/industrial capitalism and social security
Formation of industrial-capitalist society

Establishment of the nation-state

Commercialization of the labor force

Weakening of organizations standing
between the nation and individuals- Functional weakening (attenuation) of blood ties and local (community) ties -National substitute for blood ties and local ties = birth of social security
Source: 2012 edition of the White Paper on Labor and the Economy

In an industrial-capitalist society, people earned a livelihood by working for
a company as a worker. At the same time, the function of mutual assistancebased on blood ties among family members and relatives and local ties within acommunity weakened with the emergence of such a society. For this reason,
there was an increase in demands to cope with risks posed to the lives ofindividuals, namely the risk of unemployment brought about by recessioncaused corporate bankruptcies and layoffs, the risk of becoming incapacitated
for work purposes due to an illness, and the risk to lifestyles suffered in old age
emerging in line with increased longevity. In order to accommodate theseneeds, the nation-state (the idea of a sovereign state that is based on the unityof the nation and that came to the fore from around the nineteenth century)came to promote the development of social security programs funded by taxes
and insurance premiums obtained from the people. If the development of social
security programs was looked upon favorably by the people, then this would
help to stabilize political power. The functions of social security as describedabove; the functions of social security in terms of providing a social safety net
at an individual level; and the functions of social security in terms ofreallocating income, redistributing risks, and promoting social integration andthe stability and growth of the economy at a societal level were recognized asmeaningful for both the state and for individuals.
When considered in this manner, the formation of an industrial-capitalist
Chapter 1: Social Security of Asia 5society and the establishment of a nation-state are prerequisites for thedevelopment of social security programs. Moreover, economic development
and improvements in the income level of the nation in an industrial-capitalist
society enable the assumption of taxes and social insurance premiums required
to support the provision of social security programs for the people.
In Asia, we see the formation of an industrial-capitalist society in the firsthalf of the twentieth century after Japan embarked on a process ofmodernization that was sparked by the Meiji Restoration in the second half ofthe nineteenth century, at which time the shogunate ruling system that had
prevailed during the Edo Period was abandoned in favor of a policy ofindustrial development. The form of a nation-state gradually came into being
thanks to such developments as the enactment of the Meiji Constitution, theestablishment of a national legislature, and democratic elections. With the
exception of countries like Thailand that managed to hold onto their
independence; however, other Asian countries would have to wait until thesecond half of the twentieth century to establish their own nation-states andform their own industrial-capitalist societies.
Until the first half of the twentieth century, many Asian countries had been
subjugated by Western European countries. India, Malaysia, Myanmar,
Singapore, and other places were colonies of Great Britain; Vietnam,
Cambodia, and other places on the Indonesian peninsula were colonies ofFrance; the Philippines were a colony of the United States; and South Korea
and Taiwan were ruled by Japan. While China was nominally independent,
many Great Power countries at the time were provided with leased territories.
After the Second World War, many countries managed to secure their
independence from the suzerains that had been in control of colonial lands.
Examples include such countries that managed to gain their independence fromGreat Britain as India, Pakistan, Malaysia, and Myanmar; such countries thatmanaged to gain their independence from France as Vietnam, Cambodia, andLaos; the Philippines, a country that gained its independence from the UnitedStates; Indonesia, a country that gained its independence from Holland; andSouth Korea and Taiwan, countries that were no longer ruled by Japan. In
addition, there have also been countries that newly emerged through civil war(People’s Republic of China) and countries that came together after having
been divided into north and south (Vietnam emerged when North Vietnam
took over South Vietnam). After Japan became a defeated nation in the Second
World War, it remained under the control of the General Headquarters of theAllied Forces (GHQ) from September 1945 to April 1952. On April 28, 1952,
sovereignty was restored to Japan.
There were no countries that managed to be politically stable and embark
on a path of steady economic development subsequent to achieving
independence. On the Korean peninsula, the Korean War raged from 1951 to
6

1954. In China, a civil war was fought between the forces loyal to theCommunist Party and the Chinese Nationalist Party (Kuomintang) in theaftermath of the Second World War. The People’s Republic of China was bornunder the leadership of the Communist Party in 1949, at which time thegovernment of the Kuomintang fled to Taiwan. Political and social disarray
swept across China during the Cultural Revolution during the 1960s. In India,
the country may have secured its independence from Great Britain but religious
differences caused Pakistan to break away (1956), an action that was emulatedby Bangladesh in the 1970s (1972). Despite gaining independence from France
in the 1950s, Vietnam was divided into North and South Vietnam. The
Vietnam War, fueled by American intervention, continued until the 1970s.
Civil war was also the order of the day in Cambodia and Laos.
In countries where such political instability was ongoing, social security
programs were simply not developed until stable political rule could beinstituted and the country as a whole could reach a certain economic level
through economic growth and other positive changes.
3. Economic development and the development of social security
programs
In order to promote the development of social security programs, theintegrity of the nation-state and the stability of the government are essential
elements. At the same time, expansion of GDP and other measures of theeconomy—in other words, economic development—is necessary. The growthof a country’s economy enables the tax resources to be allocated to creating
and operating public-assistance programs and other social-welfare programs to
be secured and the insurance premiums required to set up and operate socialinsurance schemes to be assumed by business operators and insured persons. If
the development of social security programs can help stabilize people’s lives,
this will in turn constitute the basis for further economic development.
A rising level of people’s living standards attributed to economic
development will cause an increase in people’s demands for income security
and healthcare security. In political circles, political pressure towards
developing domestic social security programs that reflect the state of social
security programs in advanced countries will rise. The government will thenengage in initiatives with a view to building a welfare state designed tostabilize employment and enrich social security (Figure 1-2).
This correlation between economic growth and the development of social
security programs clearly exists if we trace the history of the development ofsocial security programs in Japan and South Korea.
Among Asian countries, Japan was the first to satisfy the economic
conditions for developing social security programs subsequent to the Second
Chapter 1: Social Security of Asia 7

World War. The White Paper on the Economy issued in 1956 famously
declared the end of the post-war era. As if to prove this statement correct, thegross domestic product in 1955 surpassed the peak value of this economic
measure as recorded during the pre-World War II era. Subsequently, Japanbegan to ride the wave of rapid economic growth. In 1961, a system ofuniversal healthcare insurance and universal pensions was introduced. In 1965,
social welfare laws were developed under a framework known as the Six
Welfare Laws.9 1973 came to be referred to as the First Year of Welfare in
Japan thanks to the implementation of such measures as those designed toprovide healthcare to elderly patients for free and those that enabled pension
levels to rise.
Figure 1-2. Process of developing social security programs
Economicdevelopment

Societal/familytransformations

Improvements in people’s
lives

Increase in population
Increased longevity andaging population
Transformation in family
structure (shift tonuclear family
households)

Increased demands for social security

Social security programs
developed
Produced by the authors.

In South Korea, the domestic economic infrastructure was essentiallydestroyed in the Korean War that raged for three continuous years beginning in
1950. However, national economic policies put forth under the rule of Park
Chung-hee, which began in 1961, sparked economic growth known as theMiracle on the Han River. In this connection, a public-pension scheme wasintroduced in the 1960s and a public healthcare-insurance scheme was adopted
in the 1970s. Amid ongoing economic growth, a system of universal healthcare
insurance and universal pensions was established in the 1990s.
Similar developments took place in Thailand. Beginning in the 1950s,
social insurance came to be provided to civil servants, military personnel,
employees at state-owned enterprises, and other public-sector workers.
Economic growth really started to noticeably pick up in the 1990s. In March
8

1991, a social-insurance scheme mandating membership by public-sector
workers was launched with the provision of insurance benefits for illnesses,
childbirth, disabilities, and death. This program was later expanded to provide
allowances for the elderly and children as well as coverage for unemployment.
Funding for social insurance was provided not just by contributions ofpremiums by labor and management but also notably by the government itself.
In the 2000s, the Thaksin administration set up the thirty-baht healthcare
program, which was designed to allow farmers, low-income persons, andanyone else who had not previously been covered by social insurance and otherpublic social security programs to obtain healthcare simply by paying thirtybaht. Whereas Japan, South Korea, and Taiwan had set up healthcare-security
systems based on healthcare insurance, Thailand was notable for having
developed a healthcare-security system according to a social-assistance model.
This too was made possible by the expansion of national finances attributed toeconomic development in Thailand that began in the 1990s.
Since China emerged as a socialist nation after the Second World War, it
took a different path from those taken by Japan and South Korea. State-owned
enterprises were set up in cities and people’s communes were set up in
agricultural communities as entities offering subsistence guarantees andhealthcare security for workers and income security for retirees. This was asystem of social security that was fully financed by state-owned enterprises andpeople’s communes. However, the rate of economic growth was low due to thepoor productivity of state-owned enterprises and people’s communes and otherfactors, which in turn caused the standard of living to remain low. In the firsthalf of the 1990s, China transitioned to a socialist market economy under the
direction of Deng Xiaoping and began to undergo a rapid process of economic
development. However, the gap between urban areas and agriculturalcommunities grew while such problems as the worsening of the financial
administration of state-owned enterprises emerged at this time. In thisconnection, the nation came to develop new social security programs out ofnecessity. The expansion of state finances made possible by the rapid
economic growth of the 2000s was a possible condition for facilitating thedevelopment of a foundation for social security programs.
When we examine the history of the development of social security
programs in Japan, South Korea, and China, it is a highly interesting point tonote that this history appears to have unfolded in step with the hosting of thesummer Olympic Games by each of these three countries.
Tokyo, Japan, hosted the (eighteenth) summer Olympic Games in 1964, thefirst time the summer games were held in Asia. Seoul, South Korea, hosted the(twenty-fourth) summer Olympic Games in 1988. Beijing, China, hosted the(twenty-ninth) summer Olympic Games in 2008. All three of these countries—
Japan, South Korea, and China—are able to say that they hosted the summer
Chapter 1: Social Security of Asia 9

Olympic Games while they were undergoing a process of economic growth.
That they can say that they were able to host the summer Olympic Games canalso mean that they were internationally recognized for having increased theirnational strength and successfully laid down a socioeconomic foundation for
hosting the Olympics. Just as Beijing, China, hosted the Games twenty years
after Seoul, South Korea, did the same and just as Seoul, Korea hosted theGames twenty-four years after Tokyo, Japan, did the same, there is a clear time
lag that can be traced in line with the development of the socioeconomic
foundation in each of these countries as made possible by economic growth.
The pace of the development of social security programs is also tied to the
expansion of national finances and the development of social infrastructure
through economic growth. For example, universal healthcare insurance andpension schemes were introduced at the beginning of the 1960s in Japan during
a period of rapid economic growth, a topic that we will cover in greater detailin Chapter 6. The so-called Six Welfare Laws were also fully implemented in
the middle of the same decade. Around this time, the summer Olympic Games
were held in Tokyo. In the case of South Korea, a public health insurance
scheme was adopted around the time the summer Olympic Games were held in
Seoul, which later evolved into a system of universal healthcare insurance andpension plans in the 1990s. This topic will be covered in greater detail in
Chapter 3. In the case of China, the development of social security programsby the government was accelerated in the 2000s. We will elaborate on this
topic in Chapter 2.
4. Asian welfare state theory
While the welfare state can be defined in numerous ways, the Kōjien
dictionary defines this term as follows: “a state system that aims to secure aminimum standard of living for everyone and expand physical welfare throughfull employment and social security policies.”
According to Hideyuki Takechi, the welfare state is a “state that directs amajority of government spending towards income security and social services(healthcare security, nursing care, services for disabled persons, housing,education, and more) and redistributes income to the people through social
spending and taxes with the aim of guaranteeing a right to life and promoting
full employment for the people.”10
That full employment and the enhancement of social security appear as twopillars in the definition of the welfare state is due to the influence of themethodology—known as the Keynes-Beveridge system—that underpinned
Britain’s post-Second World War welfare state. The Keynes-Beveridge system
is a blending of Keynesianism with Beveridge’s theory on social security.
British economist Keynes argued that effective demand can be created through10

government fiscal and monetary policies to induce production by companies
and thereby increase employment and promote economic growth. Beveridge
submitted the Beveridge Report, a document that proposed the establishmentof a national insurance scheme and other measures to reach and maintain anational minimum and that set forth guidelines for the development of social
security programs in Britain after the Second World War. The concepts behind
the Keynes-Beveridge system influenced the establishment of welfare states innumerous other countries in the post-war era.
The paths taken by different Western countries in establishing a welfare
state and the specific contents of each differ according to the historicalbackground of each country, socioeconomic differences, cultural factors, andother variables. Esping-Andersen’s seminal work in the area of research onmodels of welfare states is Welfare Regimes—Three Worlds of Welfare
Capitalism. In thinking about social security, Esping-Andersen looked not only
at social security as provided by the state (government) but also at the market
and families as welfare producers and suppliers. He referred to their roles aswell as the interrelationships among the state, the market, and families as
elements shaping welfare regimes and undertook a comparative study ofwelfare regimes in different countries.
Welfare regimes are categorized into the following three types of welfare
regimes 11 by making measurements in terms of 1) the extent to which
individuals and families can maintain a certain socially accepted standard ofliving irrespective of their participation in the market (labor) (measure ofparticipation support or measure of de-commodification), 2) the extent towhich there are differences in benefits and services received according to
occupation or social class (measure of equalization or measure of stratification),and 3) the extent to which the amount of the burden for welfare to be assumed
by families is reduced (the extent to which family support has been enhanced)(measure of family support or measure of de-familiarization).
Welfare regimes are specifically categorized into the following three types:
1) Liberal welfare regime (United States, Canada, and other Anglo-Saxon
countries);
2) Social-democratic welfare regime (Sweden, Denmark, and other Northern
European countries);
3) Conservative welfare regime (Germany, France, and other Continental
European countries).
In countries with a liberal welfare regime, equality of opportunity andindividual responsibility are emphasized and importance is attached to the roleof the market. Social security tends to entail the provision of minimallyrequired benefits to poor people and other limited persons on a minimallyrequired basis, as a result of which the provision of social security and theburden for providing social security correspond to low levels. Thus, social
Chapter 1: Social Security of Asia 11

security consists of low benefits for a low burden. The measure of participation
support, the measure of equalization, and the measure of family support are alllow.
In countries with a social-democratic welfare regime, universalism has been
adopted as the basic philosophy underpinning their social security programs.
Everyone possesses the same rights irrespective of income level and is entitled
to receive the same benefits. Families and the market are tasked with a smallrole while the state assumes a large role in fulfilling welfare needs. Thus, social
security consists of high benefits for a high burden. The measure ofparticipation support, the measure of equalization, and the measure of family
support are all high.
Countries with a conservative welfare regime are oriented towards theshared assumption of risks (solidarity) and familism. Welfare policies arerooted in blood ties, occupational organizations, the Catholic Church, and othersuch bonding elements. The role of the state is less than that of the state incountries with a social-democratic welfare regime while the role of families
and jobs is significant. This type of welfare regime is also known as thecorporatist welfare regime. While the measure for participation support is high,the measure for equalization is low since social-insurance schemes aredeveloped on a job-by-job basis and since differences according to
occupational status are maintained. Social security programs are put in place toprovide for those times when family members are unable to fulfill their
responsibility to care for dependents, such that the measure for family support
is also low. This type of welfare regime stands in the middle of the three types
of welfare regimes in terms of the scale to which social security benefits areprovided and the scale to which a burden for providing social welfare isassumed.
In comparing these three types of welfare regimes, the following points canbe made12:• In looking at the scale of income redistribution, we see that countries with aliberal welfare regime are small scale (small government), countries with asocial-democratic welfare regime are large scale (large government), andcountries with a conservative welfare regime are medium to large scale;• In looking at the recipients of social security benefits (payments), we seethat benefits are largely given to needy persons in countries with a liberal
welfare regime. In countries with a social-democratic welfare regime,
benefits for both generations still working and elderly generations havebeen enhanced. In countries with a conservative welfare regime, benefits arelargely given to the elderly as a way to supplement retirement income.
• In looking at differences in the attributes of social security benefits, we seethat countries with a liberal welfare regime are characterized by selectism,
whereby benefits are specifically targeted to needy persons and other12

limited groups of recipients. Countries with a social-democratic welfare
regime are characterized by universalism, whereby benefits are provided
equally to everyone. In countries with a conservative welfare regime, social
insurance may be universal but public assistance and other social welfare
benefits are subject to selectism.
Under what category of welfare regime does Japan belong?
In the context of Esping-Andersen’s theory of three welfare regimes, theform of Japan’s welfare state has come under criticism for exhibiting “badposture.”13 Until around the 1980s, social security benefit expenses in Japanaccounted for a significantly smaller portion of national income than inWestern European countries and social security spending also constituted asmaller percentage of the budgets of the national government. Back then, it
was generally understood that families and companies were taking on much of
the social security functions normally carried out by the state in the area ofsocial security for the purpose of stabilizing the lives of the people even as full
employment had been achieved. It was as if the tone of this liberal welfare
regime had taken on a deep color. At the same time, however, universal
national healthcare insurance and pension schemes were established in the
1960s while broad-ranging welfare policies were being deployed under the Six
Welfare Laws in the area of social welfare and social security programs that
could cause the country to be categorized as a conservative welfare regime
were being developed.
In the foreword to the Japanese-language edition of The Three Worlds of
Welfare Capitalism, Esping-Andersen wrote that the Japanese welfare system,
despite conforming to a hybrid form combining the key elements of liberal
welfare regimes and conservative welfare regimes in equal measure, was still
evolving. He chose to withhold his final conclusion on this topic.
Esping-Andersen’s assessment of Japan was based on the state of social
security programs in Japan up to the middle of the 1990s. However, Japan’ssocial security programs underwent changes from the second half of the 1990s
to the 2000s. On the whole, spending on social security benefits rose
dramatically in a short period of time from 64 trillion yen (17.5 percent of
national income) in fiscal year 1995 to 103 trillion yen (29.6 percent of
national income) in fiscal year 2010. In 2000, a nursing-care insurance scheme
was launched to create a universal elderly care security system for elderly
persons aged sixty-five years and older. Through the establishment of achildren’s allowance program, the scope of children covered by this allowanceand the level of benefits paid out to recipients expanded significantly incomparison to the 1990s. In response to the prolonged economic slump at thetime, the employment-insurance scheme was reviewed and labor-support
measures were enhanced.
In light of these points, Esping-Andersen’s assessment of Japan would
Chapter 1: Social Security of Asia 13

likely differ today. According to the authors of this book, Japan may formallyconstitute a country with a conservative welfare regime but it has been
selecting universalistic policies since it first began to construct a welfare state,
as can be seen in the establishment of a universal national healthcare insurance
and pension system in the 1960s. As explained in the 2011 edition of the White
Paper on Labor and the Economy, Japan ranks fourth in the world with respect
to universal healthcare insurance and twelfth in the world with respect touniversal pensions. Even compared to Western European countries, Japan wasvery early to the game in terms of building a system for the provision ofhealthcare cost security for everyone and income security for all elderly
persons.
The use of different means—namely, the universal national healthcare
insurance and pension system—of achieving universality from those used in
the United Kingdom and other Northern European countries can be described
as a feature unique to Japan. If social insurance is established with a focus onjobs as is the case in Germany, then it would be difficult to provide social
insurance coverage to self-employed or unemployed persons. In fact, selfemployed and unemployed persons are dealt with through voluntary enrolment
in Germany’s healthcare-insurance scheme. Healthcare security in the United
Kingdom and Northern Europe, where universalistic social security programs
have been set up, is based not on social insurance but on a framework that isessentially funded by taxes, as is the case with the National Health Service(NHS). Under this framework, even people who are not employed and people
who are incapable of assuming insurance premiums can be provided withhealthcare security. In contrast, a national health insurance scheme thatprovides coverage to self-employed persons; people working in the agricultural,
forestry, and fishery industries; unemployed persons; and other persons notconstituting salaried workers was established in Japan. By mandating
enrolment in this program, a system was adopted whereby this program could
provide healthcare security to everyone in conjunction with insurance for
employed persons. Administrative organs consisting of municipal governments
were called upon to take on the role of insurers for this national healthinsurance scheme. Compared to the healthcare insurance schemes in otheradvanced countries, the national health insurance scheme in Japan is highly
unique in that it provides coverage even to unemployed persons and in thatadministrative organs consisting of municipal governments serve as theinsurers for this program.
With respect to the pension system, the establishment of a national pension
scheme covering self-employed persons; people working in the agricultural,
forestry, and fishery industries; unemployed persons; and other persons notconstituting salaried workers allowed income security for the elderly to beprovided on a universal basis. The pension system in Japan is also unique in14

that it provides coverage even to unemployed persons. Revisions to the pension
system in 1985 extended coverage to the spouses of covered persons (i.e.,
primarily targeting homemakers) and students in an effort to more thoroughly
ensure the universality of the national pension system.
In this way, universal national healthcare insurance and pension schemes
are the chief feature of Japan’s social security programs. Even now, it isregarded as a system that should be protected by Japanese society.14
At the same time, pressure is frequently applied by some in government andfinancial circles to undertake a reconsideration of social security programs thatare based on concepts tied to a liberal welfare regime. An example of this is thereformation of social security programs undertaken by the Second Ad Hoc
Commission on Administrative Reform in the 1980s. During the Koizumi
administration in the 2000s, discussions were held from time to time on
reducing the scope of social security functions with a view to making social
security spending more efficient and containing such spending at the same timein accordance with the expanded scope of social security. However, there wasa strong desire on the part of the people to see overall enhancements of social
security carried out and systemic enhancements carried out in the areas ofpensions, healthcare, and nursing care in particular in the face of a dwindlingbirthrate, aging population, shrinking families, and other changes in household
structures. Consequently, policies to further universalize coverage andmaintain and enhance benefit levels were adopted. In the mid-1990s, a nursingcare insurance scheme—a system for the provision of nursing-care security toelderly persons—was established. Accordingly, the form of Japan’s welfare
state today is arguably better described as a hybrid form combining a
conservative welfare regime with a social-democratic welfare regime than as a
hybrid form combining a liberal welfare regime with a conservative welfare
regime.
On the other hand, while Esping-Andersen’s theory on the welfare state wasapplicable to advanced countries in the West, discussions on the typification of
welfare states encompassing Japan and other East Asian countries have been
raging in recent years thanks to the rapid development of social security
programs in South Korea, Taiwan, and other East-Asian countries. These
discussions are focused on the question of whether an East Asian model will
emerge. For example, some assert that such a model will emphasize the impactof Asian Confucianism while others endorse a production-based model underwhich welfare policies will be made subordinate to the prioritization of
economic policies.
Against this backdrop, there are those who suggest that we should study
this topic by incorporating a time base into the comparative theory of welfare
states. An approach that regards characteristics of the establishment of social
security programs in South Korea and Taiwan as elements of a developing
Chapter 1: Social Security of Asia 15

welfare state has emerged. Some argue that Japan should also be regarded as adeveloping welfare state when comparing it to Western countries. In thisconnection, Japan is viewed as a country that tops the list of developing
welfare states.15
However, given the significant time differences that would affect any
attempt at making comparisons between South Korea or Taiwan and thewelfare states of Western countries, it is impossible to include Japan in a list ofdeveloping welfare states that would cause the country to be regarded as being
on the same level as South Korea and Taiwan even if we could treat Japan as
coming within the scope of the definition of a developing welfare state.
Table 1-2 provides an overview of the history of the welfare state inWestern countries as well as in Japan and South Korea. The timing of thedevelopment of social security programs in Japan does not differ too muchfrom the timing at which Western European countries first began to transform
into welfare states after the end of the Second World War. As the backbone ofJapan’s social security programs, the universal national healthcare insurance
and pension system was established in 1961, sixteen years after the Second
World War came to an end. This is much earlier than the establishment of sucha system in South Korea (1990) or Taiwan (1995). As noted above, universal
healthcare insurance and universal pension schemes were introduced early by
global standards and social security programs were administered equally toeveryone during the early stages of economic growth.
Furthermore, we cannot overlook the fact that Japan has been developing
social insurance since before the Second World War, as can be seen in theenactment of the Health Insurance Act in 1922, the enactment of the National
Health Insurance Act in 1938, and the enactment of the Workers’ Pension
Insurance Act in 1941. Since there were periods of discontinuity before andafter the Second World War—namely during the period of war between the
Sino-Japanese War and the Pacific War, the time of the country’s loss in WorldWar Two, and the approximately seven-year-long period of occupation by
GHQ—the overwhelming impression is that Japan’s social security programs
were developed after the Second World War. However, social security
programs were in fact being developed from the Meiji Period through to the
Taishō Period and the early years of the Shōwa Period in the twentieth century.
The national health insurance scheme today has been organized with municipal
governments taking on the role of insurers. While this aspect has been pointed
out as a feature of Japan’s social security programs that sets this program apartfrom the healthcare insurance schemes that have been set up in Westerncountries, it should be noted that municipalities were made to serve as insurers
for the national health insurance scheme that was established in the 1930s. This
arrangement was reflected in the form of the national health insurance schemethat was set up after the Second World War.
16

Table 1-2. History of welfare states after the Second World War
Trends in Japan

39: WWII
42: Beveridge Report (UK)45: End of WWII
45: Laroque Plan (France)
46: National Insurance Act (UK)
National Health Service Act(UK)
46: National pension, childallowance (Sweden)

61: Kennedy administration(US)
63: Johnson administration(US)
Medicare and Medicaid
established

45: End of WWII

48: Republic of Korea
established
50: Framework of three welfare
laws
50: Report of the Council on
Social Security Programs
52: San Francisco Peace Treaty
comes into effect (end of
GHQ occupation)

61: Universal national
insurance and pension
schemes implemented
64: Framework of six welfare
laws
64: Tokyo Olympics held

72: Sapporo Olympics held
73: First Year of Welfare
73: Oil crisis51-53: Korean War

60: Student revolution(president Syngman Rhee
resigns)
61: Military coup
63: Park Chung-hee electedpresident

77: Workplace healthinsurance

80: Gwangju Democratization
Movement

92: Clinton administration (US)97: Blair administration (UK):Third Way

82: Nakasone cabinet
82: Health and Medical
Services for the Elderly Act
87: Japan National Railways
privatized (JR established)
89: Consumption tax
introduced

97: Nursing Care Insurance Act
98: Nagano Olympics held

02: Merkel administration(Germany)

00: Nursing Care Insurance Act
comes into effect

09: Children’s allowance
implemented
12: Comprehensive Support for
Persons With Disabilities
Act

Formation, evolution, and expansion of the welfare state

81: Reagan administration (US)New reforms

New reforms

Trends in South Korea

38: National Health InsuranceAct
41: Workers’ Pension InsuranceAct
41: Pacific War
44: Employees’ Pension
Insurance Act
45: End of WWII
46: Constitution of Japan
promulgated

79: Thatcher administration(UK)
80: OECD: Welfare State Crisis

Period ofreconsideration

Period ofreconsideration

73: Oil crisis

Emergency support anddevelopment of infrastructure

Evolution and expansion

Formation of welfare state

1940s

Development of
infrastructure

Trends in Western countries

Formation, evolution, and expansion of thewelfare state

Decade86: National Pension Act
88: Seoul Olympics
89: Universal national
insurance scheme

99: Universal national pension
scheme00: Consolidation of healthinsurance schemes(national healthinsurance)
08: Long-Term Medical
Treatment Insurance forElderly Persons Act

Produced by the authors.

Chapter 1: Social Security of Asia 17

In terms of the contents of social security programs, many programs inJapan were formulated based on programs instituted in Western European
countries. For example, Japan’s pension scheme and healthcare insurance
scheme are similar to those established in Germany and France in that they
were established to provide coverage according to occupation. In contrast,
healthcare insurance schemes in South Korea and Taiwan are operated with asingle insurer nationwide or by the state. The schemes adopted in Japan bear agreater resemblance to schemes adopted in Western European countries.
While the formation of the welfare state in Japan is such that Japan may bedescribed as a latecomer in comparison to Western Europe, Japan is aforerunner when compared to South Korea or Taiwan. In fact, social security
programs in South Korea and Taiwan are being designed with reference madeto Japanese programs. For example, South Korea has set up a long-term
medical treatment insurance scheme for the elderly that is based on theJapanese nursing-care insurance scheme and other such programs while
Taiwan is studying the implementation of a nursing-care insurance scheme
based on the nursing care insurance schemes and other such programs being
operated in Japan and South Korea. Thus, we wish to object to thecharacterization of Japan as a developing welfare state akin to that of South
Korea and Taiwan.
In any case, verification work will continue to be needed to determine
whether the Japanese welfare state conforms to a hybrid form that combines aconservative welfare regime with a social-democratic welfare regime, whether
the Japanese welfare state conforms to a form of a welfare state that is unique
to East Asia and that is shared in common with the likes of South Korea andTaiwan, or whether the Japanese welfare state can be defined as a developing
welfare state.
5. Aging populations and the future of social security in Asia
With respect to social security programs in Asian countries, the process ofbasic development has been completed in Japan, South Korea, and Taiwan,such as in terms of the attainment of universal national healthcare insurance
and pension schemes and the establishment of public-assistance programs andsocial-welfare programs. In other countries, one can presently find either aworld that is progressive in terms of ongoing development efforts or a worldthat is futuristic in terms of development efforts that are expected to beundertaken henceforth. With the twenty-first century being proclaimed an
Asian century, economic growth is expected to continue with China and India
leading the way forward. On the other hand, it is very likely that politicalinstability—of the sort we saw in the army-led coup-d’état in Thailand in May
2014—will occasionally rear its ugly head. Uncertainties arise if we18

acknowledge that economic growth and the parallel development of social
security programs depend on the political and social conditions in each country.
Against this backdrop, what can be predicted with a certain degree ofprobability as to outcome is the progression of population aging in Asian
countries.
Figure 1-3 depicts the state of the progression of population aging in Asian
countries.
The current rate of aging in Asian countries, excluding Japan, is lower than
the world average. Other than Japan, no country exceeds a 14 percent rate ofaging. However, as people live longer and bear fewer children, it is projectedthat aging will rapidly occur in the future.
The progression of population aging will be a factor promoting thedevelopment of pension schemes to provide income security to the elderly, thedevelopment of healthcare insurance schemes or healthcare programs thatprovide healthcare security, and the development of nursing-care security andother forms of welfare schemes for the elderly as the proportion of the
population consisting of elderly persons increases. It is projected that theshrinking of the working-age population, labor-force population, and total
population occurring at the same time that the population of elderly persons isincreasing will have a huge impact on the economic conditions of the country
in which such demographic changes are occurring.
As we can see in Table 1-1, the progression of population aging in Japan
relative to all other Asian countries is quite notable. Not only is a 25 percent
aging rate the highest level by far in Asia, but it is also one of the highest in theworld. If we trace the progression of aging and the history of the developmentof social security programs in Japan, we see that 1970, which was the year inwhich Japan became an aging society as the rate of aging surpassed 7 percent,coincided with the continuation of rapid economic growth and the developmentof one social security program after another. In 1970, the Child Allowance Act
was enacted. Known as the First Year of Welfare, fiscal year 1972 saw thelaunch of a scheme to provide gratuitous medical care to elderly persons andthe implementation of such measures as those that broadly increased pension
levels. In 1994, which was the year in which Japan became an aged society as
the rate of aging surpassed 14 percent, studies on creating a nursing-careinsurance scheme were commenced. The Nursing Care Insurance Act wasenacted in 1997.
Among Asian countries, the countries in which the rate of aging is highafter Japan consist of South Korea (12.3 percent) and Taiwan (11.6 percent), as
indicated in Table 1-1. However, in neither case is the 14 percent level that isregarded as the benchmark level for an aged society reached. Compared toWestern European countries, Asian countries, with the exception of Japan,
comprise many countries in which the population makeup is young.
Chapter 1: Social Security of Asia 19

Figure 1-3. Population aging in Asian countries
Actual values

Estimated values(2010)

Japan
Japan

China
India
Indonesia

South Korea
Singapore

Philippines
South Korea
Singapore

China

ThailandDeveloped
regions
Developing
regions

ThailandIndonesia

India
Philippines(Year)

Source: 2013 version of the White Paper on Aged Societies

As indicated in Figure 1-3, however, population aging will proceed rapidly
in many Asian countries as the average lifespan rises and fertility rate goes
down. The period between the time the aging rate hits 7 percent and the time ithits 14 percent is known as the doubling time and is used as a measure forindicating the speed at which the population ages. When we examine Western
European countries where aging happened earlier, the doubling time was 115
years for France, 70 years for Great Britain, and 50 years for Germany. Aging20

occurred over an extended period of time. On the other hand, the aging rate inJapan doubled in a mere 24 years from 1970 to 1994. The aging rate in South
Korea surpassed 7 percent in 2000, thirty years after this threshold was passed
by Japan. The country is expected to surpass 14 percent in 2017. At just 17
years, the doubling time in South Korea will be even less than it was for Japan.
This figure is expected to be about the same for Taiwan and China as it was forJapan, such that the pace of aging in Taiwan and China is also very high.
Table 1-3 is a figure that appears in The Aging of Society and Asia. The“time at which the total fertility rate dips below 2.1” as mentioned in the tablerefers to a total fertility rate that is less than the 2.1 that is required to maintainthe population and indicates a declining birthrate that will eventually lead to a
reduction in the population. As stated in the same book, Japan is a step aheadof other countries in experiencing a decline in their overall population. In otherwords, the total fertility rate in Japan dipped below the population replacementlevel of 2.1 in the first half of the 1960s. In around the middle of the 1990s, thecountry became an aged society with an aging rate exceeding 14%. In the firsthalf of the 2000s, the labor-force population shifted from growth to contraction,
as did the total population of Japan in the second half of the same decade.
These demographic changes are also regarded as a factor behind the prolonged
economic slump that has plagued Japan since the 1990s. Japan has undergone
population changes ahead of other Asian countries according to the following
pattern: progression of declining birthrate  transition to an aged society 
reduction in the labor-force population  reduction in the total population.
Demographically speaking, the period when a country’s working-age
population as a percentage of the total population is increasing and the
population of dependents—including children and the elderly—as a percentageof the total population is decreasing is known as population bonus. Conversely,
the period when a country’s working-age population as a percentage of thetotal population is decreasing and the population of dependents as a percentageof the total population is increasing is known as population onus. In general,
positive economic growth will persist during a population bonus while
negative economic growth will take place during a population onus. From the
1960s to the 1980s, Japan found itself in a population bonus during a period
when rapid economic growth was the order of the day. Since the 1990s, Japan
has remained mired in a population onus to this day.
According to Table 1-3, China and South Korea are expected to enter apopulation onus in around 2020. A situation in which economic growth will
decelerate even as demands for the development of social security programsfor the elderly are being made awaits. In China today, the concern is that thecountry will get old before it gets rich. As the birthrate declines and elderly
persons come to comprise a greater proportion of the population, China is
faced with the urgent need to develop social security programs.
Chapter 1: Social Security of Asia 21

Table 1-3. Demographic changes in Asian countries

PeriodPeriod when total
fertility rate falls
below 2.1

Period when the
population of elderly
persons reaches 14
percent of the total
population

Period when thelabor-force
population shifts
from growth tocontraction

Period when the total
population shifts
from growth tocontraction

1950-1955
1955-1960
1960-1965 Japan
1965-1970
1970-1975
1975-1980 Singapore
1980-1985 Hong Kong
1985-1990 South Korea
1990-1995 China

Japan

1995-2000 Thailand
2000-2005

Japan

2005-2010 Vietnam
2010-2015
2015-2020 Indonesia

Japan
Hong Kong
South Korea,
Singapore

South Korea

South Korea,
Singapore2020-2025 Malaysia
2025-2030

China, Hong Kong

China, Thailand

China

2030-2035 India
2035-2040 Philippines

Vietnam2040-2045

Malaysia, Indonesia

Thailand, Vietnam

Singapore
Thailand, Vietnam2045-2050
Note: The total fertility rate and the rate of increase/decrease in the labor-force population/total population were
measured based on the use of 5-year averages. The population of elderly persons as a percentage of the total
population is based on figures taken at 5-year intervals. For example, 1995 was categorized under 1990-1995.
Source: Takao Komine (2012).

Among Asian countries, Japan is leading the pack both in terms of the
progression of a dwindling birthrate coupled with an aging population and thecountermeasures it has been taking to deal with this situation. It is vitally
important to share Japan’s experiences—such as with respect to theimplementation of countermeasures to deal with a dwindling birthrate andcountermeasures to deal with an aging population and the development ofsocial security programs designed to address a dwindling birthrate coupledwith an aging population—with other Asian countries. Each Asian country willneed to promote the development of social security programs attuned to its
own historical circumstances, national character, socioeconomic situation, andother factors in response to the progression of aging.
22

1

The “six (inhabited) continents of earth” is a term referring to the continents of Asia,
Europe, North America, South America, Africa, and Oceania.
2“Gross national income (GNI)” is equal to gross domestic product (GDP) plus income
from overseas sources.
3
The “aging rate” is an expression of the population of persons aged 65 years and older
as a percentage of the total population. A society with an aging rate exceeding 7
percent is known as an aging society while a society with an aging rate exceeding 14
percent is known as an aged society.
4
The “total fertility rate” is equal to the sum of the single-year age-specific rates ofwomen between the ages of 15 and 49 years at a given time.
5“Western countries” in this context is a term referring to the United States, the United
Kingdom, and other countries operating under capitalism during the era in which theUnited States and the Soviet Union acted as opposing superpowers. In contrast,“Eastern countries” is a term referring to the Soviet Union, eastern European countries,
and other socialist countries.
6
As of May 2014, ASEAN is composed of 10 member countries: Thailand, Indonesia,
Philippines, Singapore, Malaysia, Vietnam, Cambodia, Laos, Myanmar, and Brunei.
7
Certified Social Workers Training Lectures Editing Committee Compilation (2012), p
12.
8Ministry of Health, Labour and Welfare. White Paper on Labor and the Economy(2012), p 12.
9
The “Six Welfare Laws” is a collective term encompassing the following 6 statutes:
Public Assistance Act (enacted in 1950), Child Welfare Act (enacted in 1947), Act on
the Welfare of Persons With Physical Disabilities (enacted in 1948), Act on Social
Welfare for the Elderly (enacted in 1963), Act on the Welfare of Persons WithIntellectual Disabilities (enacted in 1960), and Act on the Welfare of Mothers with
Dependents and Widows (enacted in 1965).
10
Hideyuki Takechi (2012), p 9.
11
References made in this paragraph from this point forth concerning Espin-Andersen’s
theory of welfare regimes refer to the contents of the 2012 edition of the White Paper
on Labor and the Economy.
12
White Paper on Labor and the Economy (2012), p 84.
13
For example, Tarō Miyamoto (2003).
14
In a report issued by the government’s National Council on the Reformation of SocialSecurity Programs as compiled in August 2013, it is stated that “universal national
insurance and pension” schemes have supported the lives of the people as a corefeature of social security in Japan and that they constitute “world-leading collective
properties of the nation”.
15
Tarō Miyamoto (2003).

Chapter 1: Social Security of Asia 23

Chapter 2:
Min BaoChina

1. Overview of China
Location
The People’s Republic of China (hereinafter referred to as “China”) is
located in the eastern part of the Eurasian continent and on the western coast of
the Pacific Ocean. With 9.60 million square kilometers of land, China abuts 14
different countries, including Pakistan and Russia. The northernmost point in
the country, Mohe county in Heilongjiang province (53.5 degrees North), andthe southernmost point in the country, Zengmu Reef in the Spratly Islands of
the South China Sea (3.9 degrees North), are separated by approximately 50
degrees of latitude and 5,500 kilometers. At the same time, the westernmost
point in the country, the eastern border of the Pamir Mountains on the westernside of Ulugqat County, Kizilsu Kirghiz Autonomous Prefecture, Xinjiang
Uyghur Autonomous Region (near 73 degrees East), and the easternmost pointin the country, where the Ussuri River in Fuyuan County, Heilongjiang, meets
the Amur River (near 135 degrees East), are separated by approximately 62
degrees of longitude and 5,200 kilometers. Provincial-level administrative
units comprise 4 municipalities, 23 provinces, 5 autonomous regions, and 2
special administrative regions. The capital of China is Beijing.
Population
The aging rate hit 7 percent in 1999 and the country has become an aging
society. According to the National Bureau of Statistics, there were 131.61
million elderly persons aged 65 years or older for an aging rate of 9.7 percent
as of the end of 2013 1 (Table 2-1). China has become the world’s mostpopulous country both in terms of total population and population of elderly
persons, trends that are expected to become further entrenched in the years tocome.
According to the China National Committee on Aging, it is possible todivide Chinese aging for the years between 2001 and 2100 into 3 stages asfollows2:
1) Rapid aging stage (2001 to 2020): It is projected that the number of elderly
persons aged 60 years or older will increase by 5.96 million each year, suchthat the population of elderly persons will hit 248 million and the aging rate
will reach 17.17 percent in 2020. The population of elderly persons aged 80
years or older will hit 30.67 million and account for 12.37 percent of thetotal population of elderly persons.

24Table 2-1. 2013 year-end population figures and a breakdown of these figures(Unit: x 10,000 persons)
Index
Total nationwide population
Area
Urban
Agricultural
Sex
Male
Female0-15 years
Agebracket16-59 years
60 years or older
65 years or older

Year-end population
figurePercentage of total
population (%)

136,072
73,111
62,961
69,72866,34423,87591,954
20,243
13,161

100.0
53.73
46.27
51.2
48.8
17.5
67.6
14.9
9.7

Source: Produced by the authors based on data provided by the National Bureau of Statistics (2014).

2) Accelerated aging stage (2021 to 2050): Those born in the baby-boom
generation will enter old age, such that the population of elderly persons
and the population of young people will become equal in 2023. The
population of elderly persons will surpass 400 million in 2050, at whichtime the aging rate will reach 30 percent. Of this number, the population ofelderly persons aged 80 years or older will hit 94.48 million and accountfor 21.8 percent of the total population of elderly persons (Table 2-2).
3) Severe aging stage (2051 to 2100): It is projected that the population ofelderly persons will reach 437 million in 2051, double the proportion of thetotal population expected to consist of young persons. The aging rate will
be maintained at around 31 percent and the population of elderly persons
aged 80 years or older will account for 25 to 30 percent of the total
population of elderly persons.
The features of aging in China are as follows:
1) The population is huge. As stated above, the population of elderly persons
65 years of age or older stood at 131 million and accounted for 9.7 percentof the total population as of the end of 2013. In 2030, the population ofelderly persons aged 65 years or older is expected to reach 240 million.
2) “China will get old before it gets rich”: While the country has attracted
much attention for its economy, it has become an aging society at adifficult stage. The development of social security programs is not yet
completed. Per capita GDP reached 1,000 dollars in 2001 and surpassed
6,000 dollars in 2012 but social security has not been enhanced.
3) Changes in the composition of the working-age population: Among theworking-age population of persons between the ages of 15 years and 59
years (one becomes an elderly person at the age of 60 years), the medianage in 1980 was 30 years and will be 40 years in 2025. Rapid aging and theshrinking of the working-age population will place a heavier burden on the
Chapter 2: China 25

working-age population.
4) Nursing care, pensions, and other social security programs, including withrespect to the provision of support for elderly persons, are undeveloped,
such that the burden of supporting elderly persons as borne by theirchildren will become heavier. The increase in the migration of persons
from agricultural communities to urban areas attributed to theimplementation of the reform and opening-up policy and the maintenanceof the one-child policy since the 1980s have resulted in households with a
4:2:1 structure (4 represents both sets of parents of a couple; 2 represents
the couple, each of whom is an only child; and 1 represents the only childof the couple). The provision of nursing care for elderly parents by an only
child is difficult indeed.
Table 2-2. Projections of population aging in China
Total
population
Year

Population of
persons aged
60 years orolder(x 100 million (x 100 million
persons)
persons)

Percentage
of total
population

Population of
persons aged
65 years or
older

Percentage
of total
population

Population of
persons aged
80 years or
older

(%)

(x 100 million
persons)(%)(x 100 million
persons)

Percentage of
population of
persons aged
60 years or
older
(%)

2001

12.73

1.33

10.42

0.91

7.14

0.126

9.50

2005

13.14

1.47

11.19

1.03

7.86

0.164

11.16

2010

13.6

1.74

12.78

1.17

8.59

0.213

12.24

2015

14.08

2.15

15.28

1.39

9.85

0.264

12.28

2020

14.44

2.48

17.17

1.74

12.04

0.307

12.38

2025

14.61

2.93

20.06

2.00

13.69

0.341

11.64

2030

14.65

3.51

23.92

2.38

16.23

0.424

12.08

2035

14.61

3.94

26.96

2.86

19.55

0.567

14.39

2040

14.51

4.04

27.88

3.19

21.96

0.637

15.77

2045

14.32

4.13

28.84

3.21

22.40

0.772

18.69

2050

14.02

4.34

30.95

3.23

23.07

0.945

21.77

Source: Bengong Li (2007).

5) Differences between regions are large. Population aging is described interms of a weather-related analogy: “low pressure in the west and highpressure in the east.” In other words, the aging rate is higher in the coastal
areas of the east, where the economy is booming, than in western areas thatare economically lagging. Whereas Shanghai became an aging society in
1979, the Ningxia Hui Autonomous Region became an aging society in2011. While the aging rate in agricultural communities is 1.24 percentage
points higher than in urban areas, this relationship is expected to become
inverted after 2040.
26

State of the economy
Gross domestic product (GDP) increased at an average rate of 9.8 percent
per year from 1979 to 2012, such that the total amount of GDP surged from364.5 billion renminbi yuan in 1978 to 51,894.2 billion renminbi yuan in 2012.
China became the second-largest country in the world in terms of GDP in 2010
but per capita GDP stood at 38,420 renminbi yuan in 2012 (Table 2-3).
Table 2-3. Changes in GDP in China (1978 to 2012)
Year

1978

1980

1985

1990

1995

2000

GDP (x 100
million renminbi)

2005

2010

2011

2012

3,645

4,546

9,016

18,66860,794

99,215 184,937

401,513 473,104 518,942

381

463

858

1,644

5,046

7,858

30,015Per capita(GDP inrenminbi/numbe
r of persons)

14,18535,19838,420Source: Produced by the authors based on data included in the China Statistical Yearbook.

In China, income disparity is growing. The Gini coefficient was estimatedto be 0.412 in 2000 according to the National Bureau of Statistics but it isbelieved that this figure is too low. The National Bureau of Statistics indicatesthat the Gini coefficient hit 0.479 in 2003, peaked at 0.491 in 2008, and has
been gradually going down since then. It was reported to be 0.474 in 2012. The
Chinese government has officially acknowledged that income disparity isworsening3.
Politics and administrative affairs
On October 1, 1949, the People’s Republic of China was born. China is asocialist country operating under one-party rule with the Chinese Communist
Party in firm control. Under this ruling system, the party is superior to thenation. This superiority of the party over the nation has also been realized inlocal governing structures. In other words, the party system exists alongside
the structure of the state at all levels from the central government to local
governments, such that party committees and other party organizations
exercise command over the structure of the state.
The structure of the state in China consists of the following: the National
People’s Congress, the legislative branch (corresponding to the Diet in Japan);the State Council, an administrative organ (Central People’s Government); theSupreme People’s Court, a judicial organ; the Supreme People’s Procuratorate,
a prosecutorial organ; the President, which corresponds to the head of thecentral state; and the Central Military Commission, a military organ (same as
the Central Military Commission of the Communist Party of China).
Since 1997, the four administrative divisions of China have consisted of the
Chapter 2: China 27

following: the province (first administrative division), prefecture (second
administrative division), county (third administrative division), and township(fourth administrative division). Nationwide, there are provinces, autonomous
regions, and municipalities. Municipalities and comparatively large cities have
districts and counties while autonomous prefectures have counties,
autonomous counties, and cities. Autonomous regions, autonomous prefectures,
and autonomous counties constitute minority autonomous regions (Figure 2-1).
Presently, the country is home to 23 provinces, 5 autonomous regions, 4municipalities, and 2 special administrative regions.
There have been a number of generations of Chinese leadership of the three
powers of China—party, state, and military—as follows: the first generation,
as headed by Mao Zedong (1949 to 1976), the second generation, as headed by
Deng Xiaoping (1976 to 1989), the third generation, as headed by Jiang Zemin(1989 to 2002), the fourth generation, as headed by Hu Jintao (2002 to 2012),
and the current fifth generation, as headed by Xi Jinping. The government ofXi Jinping will remain at the helm of the country for the next ten years.
Figure 2-1. Chinese administrative divisions
Country

Province

Specialadministrative
regionAutonomous
regionMunicipality

Prefectu
reCityDistrict

CountyAutonomous
prefecture/prefecture

City/countyDistrict

Subdistrict

Town

Autonomous
countyCountySubdistrict/t
own

Subdistrict

Neighborhood/community

Neighborhood/community

Ethnictownship

Neighborhood/community

Neighborhood/community

sumu

City

LeagueCity

Subdistrict

BannerTown

Subdistrict

Neighborhood/community

Town

Neighborhood/community

Neighborhood/community

District

Neighborhood/community

Source: Produced by the authors based on the administrative divisions of China, Regulations Governing theOrganization of Street Administrative Offices, and the PRC Law Governing the Organization of Urban
Residents’ Committees.

28

Reforming social security programs and the current framework of social
securitySocial security programs are divided into five broad categories: 1) social
insurance, 2) social welfare, 3) security for military personnel, 4) social
assistance (livelihood protection and other forms of poverty relief), and 5)
housing security4 (Table 2-4).
With the founding of the People’s Republic of China on October 1, 1949,
the state became the party ultimately responsible for pension security.
Regulations governing the family register system began to be enacted in 1958.
In 1964, the Regulations of the Department of Public Security Governing theTransferring of Family Registers were promulgated. In principle, thetransferring of family registers from agricultural communities to urban areas
was banned and the family register system was established. Family registers
were divided into two categories: family registers for agricultural communities
and family registers for urban areas. In this way, China became a binarysociety5. Social security programs for urban areas and social security programs
for agricultural communities differed, such that social security had been
designed to correspond to company wage earners, state institutions, andbusinesses in urban areas but was dependent on family support in agriculturalcommunities.
Table 2-4. Breakdown of social security programs in China
Social insurance:
Social welfare:
Socialsecurity

Security for military
personnel:

Social assistance:
Housing security:

Pension insurance, unemployment insurance, healthcare insurance,
workers’ accident insurance, childbirth insurance
Welfare for the elderly, welfare for children, welfare for thedisabled, welfare for womenSpecial preferential treatment for active-duty military personnel
and family members, compensation for the families of wounded
and deceased military personnel, livelihood compensation for
professional soldiers, job placements for retired soldiers
Accident relief, minimum subsistence guarantee, homeless relief,mutual social assistance, social relief in agricultural communities
Housing reserve scheme, low-cost housing rental scheme

Source: Based on data provided by the PRC State Council Information Office (2004); partially revised by theauthors.

In urban areas, the Labor Insurance Regulations of the PRC were
promulgated in 1951, as a result of which social security programs for workers
came to consist of a number of schemes, including those for pensions,healthcare, and workers’ compensation. Unitary welfare (where the “unit”
constituted the workplace) emerged to provide workers belonging to units andtheir families with the benefits of a “cradle-to-the-grave” security systemdesigned to do everything from assigning daycare spots for children to
allocating housing. At the time, social relief under the jurisdiction of the
Department of Civil Affairs primarily targeted the so-called three-“no” persons
Chapter 2: China 29

(三无人员) (persons with no relatives, no ability to work, and no source of

earnings) in urban areas. Orphans, disabled persons, and others were protectedby social welfare institutes and other such types of facilities.
Social security in agricultural communities is shouldered by agriculturalcommunity organizations and families. Group security consists only ofcollaborative agricultural community healthcare and a program of “fiveguarantees” for agricultural communities (whereby security in terms ofclothing, food, housing, medicine, and funerals is provided to persons withoutlabor skills or subsistence guarantees in agricultural communities; elderly
persons receiving these “five guarantees” as described hereunder consist ofelderly persons to whom this program applies).
The shifting of the country to a socialist market economy and the adoptionof reforms to state-owned enterprises after the reform and opening-up policy
was implemented saw the promulgation of Provisional Regulations Governing
the Implementation of a Labor Contracting System at State-owned enterprises
in 1986, whereupon layoffs and restructuring occurred at state-owned
enterprises. In 1993, the framework for a market economy was laid out in more
concrete terms by including elements consisting of social insurance, social
assistance, social welfare, preferential placements, social mutual help, and“security based on individual savings.” For pension insurance, test operationsof social pooled funds and individual accounts began in 1995. In 1997, theamounts to be paid by companies and individuals for a basic old-age pension
insurance scheme were determined. In March 1988, the Ministry of Labor andSocial Security was established to consolidate the system by which social
security was being managed. With respect to the basic pension insurance
scheme for company employees, contributions into individual accounts werereduced from 11 percent to 8 percent of wages in December 2005. All
contributions are paid by the individual, such that no contributions by units areadded to these individual accounts.
In the area of health insurance, a healthcare security scheme for employees
was set up nationwide in 1996 through the merging of social pooled funds andindividual accounts. In 1998, a basic healthcare insurance scheme for urban
employees was promulgated with healthcare insurance premiums to becontributed by both individuals and companies. Companies were required tocontribute 6 percent of the wages of employees while individuals were required
to contribute 2 percent of their own wages. In 2007, a test for a basic healthcare
insurance scheme for urban residents was promulgated, whereby healthcare
insurance for unemployed urban residents was implemented on a test basis forthe benefit of primary and middle school students, the elderly, disabled persons,and others.
Since the 1990s, huge numbers of laid-off and unemployed workers
emerged as a result of reforms undertaken at state-owned enterprises and30

collective enterprises. In 1997, a State Council Notice on Establishing
Minimum Subsistence Guaranteeing Schemes in Urban Areas Nationwide waspromulgated. The Regulations Governing Minimum Living Standard
Guarantees for Urban Residents were put forth in September 1999 and went
into effect in October. In 2007, a minimum living standard guarantee (MLSG)
scheme was implemented in agricultural communities based on theimplementation of the MLSG system in urban areas. In January 2013, there
were 21,343,029 persons covered by the MLSG for urban residents nationwide
and 53,476,080 persons covered by the MLSG for residents in agriculturalcommunities nationwide.
The PRC Social Insurance Law was passed in October 2010 and went into
effect in July 2011.
2. Current state of social welfare
Since the 1950s, the social welfare system has consisted of welfare schemes
operated on a fragmentary and closed basis primarily for company employees
in urban areas. The government also extended social security to persons
dealing with difficult living conditions, including eligible elderly persons,orphans, and disabled persons. This system also included special welfare
services provided under the charge of the Department of Civil Affairs, benefits
provided to employees by business units, and community welfare services
provided by residents’ committees. In other words, this system offers typicalsocial welfare of a residual nature. There is a state of inequality between urban
areas and agricultural communities, such that the residents of urban areas areprovided with services on par with those provided by welfare states while theresidents of agricultural communities are essentially given nothing. With thearrival of the 1980s, economic reforms were promoted. In 1986, China issued afive-year plan for civil affairs covering the years between 1986 and 1990
during which time the country would be transformed from a country engaging
simply in the deployment of welfare-service programs to a country in which
three parties—the state, civilian organizations, and individuals—would bepermitted to join forces to carry out three basic transformations of facilities andservices. These three transformations refer to the transformation from a closed
type to an open type, from relief to welfare, and from detention to detention
and rehabilitation. Beginning in the 1990s, Resolutions on Deepening Reformsof the Residential System in Urban Areas; the Opinion on Accelerating theRealization of the Socialization of Social Welfare; laws on protecting the rights
and interests of the elderly, women, and the disabled; and Regulations on theProvision and Operations of Five Guarantees in Agricultural Communities
were promulgated one after another. In October 2006, Resolutions of the CCP
Central Committee on Major Issues Regarding the Building of a Harmonious
Chapter 2: China 31

Socialist Society were adopted to form the foundation for the development ofsocial welfare.
An overview of welfare for elderly persons, welfare for children, andwelfare for the disabled is provided below.
Welfare for elderly persons(1) Development of laws
Since the 1980s, nuclear families have been on the rise in China due to thetransformation of socioeconomic systems, the progression of aging, and theimplementation of the one-child policy. The traditional family support
provided to elderly persons continues to undergo functional weakening.
The legal foundation for welfare for elderly persons lies in the Constitution and
the PRC Law on Securing the Rights and Interests of Elderly Persons. Article
45 of the Constitution reads as follows: Citizens of the People's Republic ofChina have the right to material assistance from the state and society when
they are old, ill or disabled [lose the ability to work]. The state develops thesocial insurance, social relief and medical and health services that are
required to enable citizens to enjoy this right….
In 1994, the Regulations on the Provision and Operations of Five
Guarantees in Agricultural Communities were put into effect, thereby enabling
the provision of security to eligible persons dealing with difficult living
conditions in agricultural communities. While the 1996 PRC Law on
Protecting the Rights and Interests of the Elderly contains provisions for theprotection of the rights of the elderly and the maintenance of social security
and elderly services and programs, the job of supporting the elderly remained
primarily the responsibility of families. As the numbers of elderly persons andelderly persons requiring nursing care rose rapidly, the same law was
subsequently amended to reflect the introduction of various services to support
elderly persons in local communities and facilities for elderly persons in placeof the family as prompted by a declining birthrate, migrant labor, and otherfactors6. The revised PRC Law on Protecting the Rights and Interests of theElderly was put into force in July 2013. The key policies and laws relating toelderly persons as put forth by the government from the 1990s to the end of2013 are as outlined in Table 2-5.
(2) Facility services and community services
Services for the elderly include facility services and community services.
Urban institutions where services are provided to elderly persons who areadmitted include social welfare institutions for the aged, homes for the aged
(special homes for the aged), and hostels for the elderly (homes for the elderly
provided for reduced fees). Home services include services provided by centersof service for the elderly and services provided by nurseries for the elderly.
32

These services are included in community services that are provided in urban
areas. In agricultural communities, there are institutes for the elderly that admit
the so-called three-“no” persons ( 三 无 人 员 ) (persons with no relatives, noability to work, and no source of earnings) (Table 2-6). Home services arebeing developed with a focus on community services.
Table 2-5. Legislation related to welfare programs for the elderly
Year

Name

January 1994

Regulations on the Provision and Operations of Five Guarantees in Agricultural
Communities
Outline of the Seven-Year Development of Programs for the Elderly (1994-2000)
PRC Law on Protecting the Rights and Interests of the Elderly comes into force
Provisional Method for Managing Homes for the Elderly in Rural Areas
Template for Architectural Designs for the Aged
Provisional Method for Managing Social Welfare Institutions
Opinion on the Socialization of Social Welfare Programs
Decision on Fortifying Programs for the Elderly
Basic Template for Social Welfare Institutions for the Aged
Proposal for the Implementation of the Starlight Plan Concerning Community-BasedWelfare Services for the Aged
Outline of the Tenth Five-Year Plan for Developing Senior Programs in China (20012005)
Outline of a Plan for Developing a Nursing-Care Program (2005-2010)
Opinion on the Accelerated Development of Service Programs for the Aged
Outline of the Eleventh Five-Year Plan for Developing Senior Programs in China(2006-2010)
Opinion on the Comprehensive Promotion of At-Home Service Programs for the
Elderly
Outline of the Twelfth Five-Year Plan for Developing Senior Programs in China (20112015)
Plan for Creating a Social Service System for the Elderly (2011-2015)
Revised PRC Law on Protecting the Rights and Interests of the Elderly comes into
force
Some Opinions by the State Council on Accelerating the Development of Service
Programs for the Aged (services for the aged: services for the elderly)

December
October 1996
March 1997
May 1999
DecemberFebruary 2000
AugustFebruary 2001
May
July
August 2005
February 2006
September
January 2008
September 2011
DecemberJuly 2013
AugustSource: Produced by the authors based on official documents issued by the Chinese government,
the Ministry of Civil Affairs, and other such sources.

According to the 2012 Statistical Bulletin on the Development of Social
Services, there were 44,304 facilities of all types for the elderly nationwide inthat year, an increase of 3,436 over the preceding year. These facilities houseenough beds to accommodate 2.15 percent of all elderly persons nationwide, anincrease of 7.5 percent on a year-on-year basis. The number of elderly persons
admitted to these facilities was 2,936,000, an increase of 12.7 percent over thepreceding year, of which 198,000 persons had been admitted to community
accommodations or day-service facilities.
Chapter 2: China 33

Table 2-6. Classification of welfare services for the elderly in China
Facility type

Entitled persons

Services

Social welfare institution for the
aged

Three-“no” persons (三无人员)(persons with no relatives, noability to work, and no source of
earnings), independent elderly
persons, elderly persons requiring
assistance, elderly persons
requiring nursing care

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Home for the aged

Independent elderly persons,elderly persons requiring
assistance, elderly persons
requiring nursing care

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Hostel for the elderly

Independent elderly persons

Meals, cleaning and sanitation,
culture and recreation, medical
health, and more

Home for the device-aided elderly

Elderly persons requiring
assistance

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Nursing home

Elderly persons requiring nursing
care

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Home for the elderly in a ruralarea

Three-“no” persons (三无人员)(persons with no relatives, noability to work, and no source of
earnings), aged persons entitledto any of the five guarantees,other elderly persons

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Nursery for the elderly

All elderly persons

Daily living, culture andrecreation, rehabilitation, medical
health, and more

Center of service for the elderly

All elderly persons

Culture and recreation,
rehabilitation, medical health,visiting services, and more

Source: Produced by the authors based on material provided by the PRC Ministry of Civil Affairs (2001).

Local welfare policies began to be enacted and efforts to reform welfare
services commenced in the second half of the 1980s, a time when the demand
for welfare had increased due to the progression of aging.
In 1989, it was decided that community services would be developed acrossthe nation. In 1993, the Opinion on Accelerating the Development ofCommunity Service Programs was issued throughout the country. From 2001
to 2004, the Starlight Plan on Old-Age Welfare Services in Communities
Nationwide (Starlight Plan on Welfare Services for the Elderly in Communities
34

Nationwide) was implemented, resulting in the establishment of 32,000
Starlight Senior Centers across China. Community services consist of povertyrelief and welfare services for the elderly, children, the disabled, poor
households, and persons entitled to preferential treatment measures; services of
convenience provided to community residents; re-employment services for
unemployed persons; and services for the socialization of social security.
Services for the elderly include homes for the elderly in rural areas, nurseries
for the elderly, hostels for the elderly, universities for the elderly, activity
centers for the elderly, elderly care groups (contract services for the elderly),
legal advice for the elderly, psychological counseling, and health counseling.
In 2013, Some Opinions on Accelerating the Development of Programs
Providing Services for the Elderly were promulgated. In order to enable theelderly to live at home, the goal is to develop a service system by 2020 thatwould entail the provision of support by facilities primarily at a community
level and that would make it possible for the elderly in urban areas andagricultural communities to receive care with the given functions and scale ofeach facility. By creating a service network for at-home elderly persons andhaving companies participate in the provision of home services, services
tailored to individual needs will be provided, such as by facilitating theprovision of delivered meals, baths administered by visiting caregivers,
cleaning services carried out by visiting staff members, examinations carriedout by visiting physicians, and first-aid administered by visiting caregivers.
(3) Moves to impose qualification requirements on social welfare facilities in
China
In order to appropriately set job standards for nursing-care workers andprovide occupational education and training on a scientific and normative basis,state occupational standards applicable to elderly care workers (statequalifications for care workers) were enacted and, in 2002, put into force tosignify the launch of a program for imposing qualification requirements on
workers. These were the first occupational standards imposed on nursing-carejobs at facilities for the elderly (primarily social welfare institutions).
Care workers at welfare facilities in the past were accorded a low social
standing and their job was seen as being dirty and hard and was associated withpoor working conditions. Facilities tended to be staffed by migrant workers
comprising middle-aged women from agricultural communities who were
engaged in the provision of nursing care on a part-time basis. Nursing-care
workers were generally lacking in expert knowledge since they did not receive
education on nursing care. Conventional welfare facilities for the elderly weremainly targeted at the so-called three-“no” persons (三无人员) (persons with norelatives, no ability to work, and no source of earnings) and provided services
free of charge. In the 1980s, the one-child policy and the reform and openingChapter 2: China 35

up policy were put into effect, which led to the transformation of families into
nuclear families, the aging of society, and changes in the nature of the demand
for nursing care provided by facilities. In urban areas, the number of elderly
persons other than the so-called three-“no” persons (三无人员) (persons with norelatives, no ability to work, and no source of earnings) who wished to be
admitted to facilities rose with each passing year. Against the backdrop ofthese societal conditions, the quality of nursing care provided by facility staff
members needed to be improved. The Ministry of Civil Affairs sought tocharge for expenses incurred by persons admitted to facilities and implemented
other such measures according to a slogan calling for the socialization of social
welfare.
These days, nursing-care workers require nursing-care qualifications.
Specifically, these qualifications comprise 1) general conditions of theoccupation, 2) basic requirements, 3) work requirements, and 4) a weighting
table. In 2011, the State Occupational Standards Applicable to Elderly Care
Workers—which are part of the State Standards on Occupational Skills—wererevised.
System of elderly care workers
Job grade: grade 4; introductory level (state occupation qualifications level 5),intermediate (state occupational qualifications level 4), advanced (state
occupational qualifications level 3), technical expert (state occupational
qualifications level 2)
Educational history: equivalent to graduation from junior high school
Training hours: introductory 180 hours or more; intermediate 150 hours or more;advanced 120 hours or more; technical expert 90 hours or more

Welfare for children
Welfare for children shall be explained by dividing this topic into thefollowing categories: (1) protection of the rights and interests of children, (2)education of children, (3) welfare facilities for children, and (4) programs forrescuing and protecting juvenile vagrants.
(1) Protection of the rights and interests of children
In 1991, the PRC Law on the Protection of Minors was passed, thereby
enabling such measures as those that protect minors in the home, those that
protect minors at school, those that protect minors in society, and those that
protect minors in the judicial system. In 1992, China became the one hundred
tenth country to ratify the United Nations Convention on the Rights of theChild. In 1999, the PRC Law on Preventing Crimes by Minors and the PRC
Law on Adoptions were passed, thereby securing the rights of children. Laws
relating to children that have been enacted since the 1980s are as outlined inTable 2-7.
36

(2) Education of children
With the promulgation of the Regulations on the Operations of Urban
Kindergartens (enforcement draft) in 1979, the Opinion Concerning theDevelopment of Early Childhood Education in Agricultural Communities in
1983, and the Regulations on the Management of Kindergartens in 1989,
initiatives affecting early childhood education in urban areas and agriculturalcommunities were proactively undertaken. Persons entitled to receive
preschool education consist of infants and toddlers between the ages of zeroand two years. There are daycare centers (admission facilities) andkindergartens (operated under the jurisdiction of the Ministry of Education),
the latter, which are intended for young children from the age of three years up
to the age at which such children are enrolled in primary school. As of 2012,
there were 181,000 kindergarten establishments nationwide attended by
36,858,000 children 7 . In 2006, the Law on Compulsory Education wasamended, with the contents of amendments including exemptions from paying
tuition and miscellaneous fees, the free provision of textbooks to children
facing difficult economic conditions, and the subsidization of boarding costs.
The PRC Law on the Protection of Minors also stipulates that the government
shall provide compulsory education to minors belonging to economicallydisadvantaged households, disabled minors, and minors who are members of
the floating population.
(3) Welfare facilities for children
Welfare facilities for children fall under the jurisdiction of the Ministry of
Civil Affairs and constitute admission facilities primarily operated for orphans.
In urban areas, these facilities are operated for the so-called three-“no” children(children with no relatives, no ability to work, and no source of earnings). In
agricultural communities, these facilities are operated for children requiring
any of the five guarantees.
Welfare facilities for children include welfare institutions for children, thechildren’s section in social welfare institutions, orphan schools, rehabilitation
centers for disabled children, and special education classes held at a
community level. In 2006, the Opinion on Fortifying Programs for Rescuing
Orphans was issued with stipulations that provided for the specificresponsibilities to be fulfilled in rescuing orphans and the contents ofprotection. In 2009, the Notice Concerning the Enactment of MinimumStandards for Bringing Up Orphans was promulgated to establish minimum
standards for bringing up orphans living in institutions and foster children
living with families. According to a statistical bulletin on the development ofsocial services (Chinese name: 2012 Bulletin on the Development of Social
Services), there were 570,000 orphans nationwide in 2012, of whom 95,000
were living in facilities and 475,000 were foster children.
Chapter 2: China 37

Table 2-7. Child welfare-related laws
April 1986

PRC Law on Compulsory Education passed at the National People’s Congress(amended PRC Law on Compulsory Education came into effect in June 2006)

September 1989

Regulations on the Management of Kindergartens promulgated by the State
Education Commission

April 1991

Regulations Banning the Use of Child Labor promulgated by the State Council

September

PRC Law on the Protection of Minors promulgated (amended PRC Law on theProtection of Minors came into effect in January 2013 after this law was amended
for the first time in December 2006 and the second time in October 2012)

DecemberConvention on the Rights of the Child ratified by the Chinese government

February 1992

Outline of a Plan for the 1990s for the Development of Children in China
promulgated by the State Council
Implementation Bylaws for the PRC Law on Compulsory Education passed at the
National People’s Congress

July 1994
October

Enforcement Method Concerning the Development of Programs for the Classroom
Integration of Disabled Children promulgated by the State Education Commission
PRC Law on Maternal and Child Health passed at the National People’s Congress

NovemberSome Regulations on the Publishing of Reading Materials for Young Children
promulgated by the Newspaper Publishing Office

DecemberSpecial Regulations on the Protection of Underage Laborers promulgated by the
Ministry of Labor
Method for Managing Health at Daycare Centers and Kindergartens promulgated by
the Ministry of Health and the State Education Commission

March 1995

PRC Law on Education passed at the National People’s Congress

August 1996

Method for Supervising the Meals and Health of Student Collectives promulgated by
the Ministry of Health

March 1998

Provisional Method Concerning the Attendance of School by Migrant Children
promulgated by the State Education Commission and the Ministry of Public Security

June 1999

The PRC Law on the Prevention of Crimes by Minors passed at the National People’s
Congress

May 2001

Summary of the Growth of Children in China (2001-2010) promulgated by the StateCouncil

October 2002

Regulations Banning the Use of Child Labor promulgated by the State Council andthe Regulations Banning the Use of Child Labor as promulgated in 1991 repealed

January 2006

Opinion on Fortifying Programs for Vagrant Minors put into effect by the Ministry of
Civil Affairs and the Ministry of Education

December 2007

Basic Template for Facilities for Rescuing and Protecting Vagrant Minors put into
effect by the Ministry of Civil Affairs

July 2011

Outline of the Development of Children in China (2011-2020) promulgated by theState Council

Source: Produced by the authors based on official documents issued by the Chinese government.

(4) System for rescuing and protecting juvenile vagrants
The release of the Opinion on Fortifying Programs for Vagrant Minors in
2006, the Basic Template for Facilities for Rescuing and Protecting Vagrant38

Minors in 2007, and the Opinion on Fortifying and Improving Programs for
Rescuing and Protecting Vagrant Minors in 2011 led to the establishment ofchildren’s rescue centers where vagrant minors could be provided with thebasics of life, education, healthcare, and psychological care. According to a2012 statistical bulletin on the development of social services as released by
the Ministry of Civil Affairs, there were 724 service institutions for detaining
and rescuing children nationwide in which a total of 87,000 beds and 54,000
persons were housed as well as 261 centers for rescuing and protecting vagrantchildren in which a total of 10,000 beds were housed.
Welfare for the disabled
According to the sixth national population census and second national
survey on disabled persons, there were 85,020,000 disabled persons as of theend of 2010.8 In breaking this figure down by type of disability, we can givethe following figures: 12,630,000 blind persons; 20,540,000 deaf persons;
1,300,000 persons with language and speech disorders, 24,720,000 physicallydisabled persons; 5,680,000 intellectually disabled persons; 6,290,000
psychologically disabled persons; and 13,860,000 persons with multiple
disabilities. Welfare policies for the disabled began to be deployed in the 1980s.
The current situation surrounding welfare for the disabled is outlined below.
The China Welfare Fund for the Handicapped was established in 1984 andthe China Disabled Persons’ Federation was founded in 1988. The PRC Act on
the Protection of Disabled Persons was passed in 1990 and went into effect thefollowing year. The amended PRC Law on the Protection of Disabled Persons
was put into effect in 2008, the contents of which included general provisions
and provisions on rehabilitation, education, employment, cultural activities, theenvironment, legal responsibilities, and the protection of rights and interests.
This law came to constitute the basic law on programs concerning disabled
persons. Article 14 in the section on general provisions designates that the third
Sunday of May each year is the National Day of Assisting Disabled Persons(day on which assistance is provided to disabled persons nationwide). In 2007,
the Regulations on Protecting the Employment of Disabled Persons were put
into effect.
In 1988, the Five-Year Work Outline for Programs for the Disabled (1988
to 1992) was put into effect and constituted the first plan for developing
programs for the disabled. This outline was subsequently revised. In 2011, theTwelfth Five-Year Plan Outline for Programs for the Disabled in China (2011to 2015) was put into effect. A system of social security and services for thedisabled was prepared to systematically guarantee the accommodation of basic
needs by 2015, including needs in terms of basic living, healthcare,rehabilitation, education, jobs, culture, and sports. This system aimed to enable
Chapter 2: China 39

the disabled to participate in social activities as equals.
In the Eleventh Five-Year Plan Outline (2006 to 2010), rehabilitation
projects were undertaken to allow 10,370,000 disabled persons to recover to acertain extent. The fact that there were 1,704 special education schools for thedisabled that were attended by 426,000 disabled students indicated thatcompulsory education for disabled children had improved. There were 4,704
job-training institutions for the disabled providing job education and training
for 3,765,000 people. There were 3,019 employment service institutions for thedisabled helping 1,797,000 people find jobs in urban areas and 6,184,000
people become economically independent in agricultural communities.
16,237,000 disabled people and 42,376,000 disabled persons in urban areas
and agricultural communities, respectively, were provided with various formsof social security. Legal service institutions for the disabled came to number
3,231 and were used by 579,000 people. One hundred cities across China
became models for barrier-free living to help usher in improvements in barrierfree environments in urban areas9.
2001 saw the promulgation of the Basic Template on Social Welfare
Facilities for the Disabled, which set forth specific standards applicable to theoperations of and equipment and systems found in welfare facilities for thedisabled. According to the 2012 statistical bulletin on the development ofsocial services, there were 257 facilities for intellectual and psychologicaldisabilities operating under the jurisdiction of the Department of Civil Affairs
nationwide as well as 156 mental hospitals housing a total of 41,000 beds and
36,000 admitted patients.
3. Current state of healthcare security
The current healthcare insurance scheme in urban areas can be traced backto the labor insurance and healthcare scheme and publicly funded healthcare
scheme of the 1950s. For the labor insurance and healthcare scheme, funds
were fully assumed by companies, such that laborers assumed nothing andcould use what the scheme offered free of charge. The publicly funded
healthcare scheme was targeted at public-sector workers belonging to state
institutions. Users were not required to contribute funds and were provided
with free healthcare security. In agricultural communities, a collaborative
healthcare scheme for agricultural communities was put into force in the 1960s.
Members of collectives helped one another and assumed all costs in full.
The labor insurance and healthcare scheme and publicly funded healthcare
scheme were abolished in 1998 in response to increasing healthcare costs andthe increasing fiscal burden being placed on the state as a result of the aging ofsociety and moves to make healthcare costs free of charge. At the same time,40the collaborative healthcare scheme for agricultural communities may haveoffered measures to reduce the burden of healthcare costs placed on residents.
However, this scheme came to be maintained by a mere 10 percent ofagricultural regions by the end of the 1980s as the implementation of reforms
to the economic structure of agricultural collectives and the economic strengthof agricultural collectives weakened significantly since the end of 1970s. Fromthat time forth, no basic healthcare insurance scheme for agricultural workers
existed until a new collaborative healthcare insurance scheme for agriculturalcommunities was put into effect.
Table 2-8. Types of healthcare insurance and covered persons
Name

Basic healthcare
insurance for urban
employees

Insured persons

Coverage form

1) Employees of all enterprises and public
1) Compulsory
institutions in urban areas
2) Employees of township and village2) Optional
enterprises and self-employed persons

Number of
insured persons(2012)

264.67 million

Basic healthcare
insurance for urban
residents

Urban residents

Optional

271.22 million

New scheme forproviding collaborative
healthcare insurance inagriculturalcommunities

Residents of agricultural communities

Optional

805.00 million

Source: Produced by the authors based on the 2013 Summary of Health Statistics in China as issued by the PRC
Commission of Health and Family Planning.

From the 1980s to the 1990s, efforts to carry out a series of reform
measures on healthcare security schemes for the purpose of offering universal
healthcare security were carried out, resulting presently in the establishment ofbasic healthcare insurance for urban employees, a new scheme for providing
collaborative healthcare insurance in agricultural communities, and basic
healthcare insurance for urban residents. Such insurance schemes are explained
below (Table 2-8).
Basic healthcare insurance for urban employees
In 1998, the labor insurance and healthcare scheme and publicly funded
healthcare scheme were abolished. A basic healthcare insurance scheme forurban employees was established on a nationwide basis through the integrationof socially pooled funds and individual accounts.
Insured persons consist of 1) the employees of companies (state-run
Chapter 2: China 41

enterprises, collective enterprises, foreign-affiliated enterprises, and privatesector enterprises) and public institutions (government institutions, business
units, social groups, and private-sector non-profit groups) in urban areas and 2)
the employees of township and village enterprises and self-employed persons.
Insured persons coming under 1) are insured on a mandated basis while insured
persons under 2) are insured on an optional basis.
Insurance premiums are assumed by both labor and management with theemployer assuming 6 percent of the total amount of the annual wages oflaborers belonging to its workforce in the preceding fiscal year and eachindividual laborer assuming 2 percent of the annual wages he or she earns. A
retiree will not assume basic healthcare insurance premiums. The insurance
premiums of a laborer shall be paid into an individual account while 70 percentof the insurance premiums owed by the employer will be paid into a sociallypool fund and the remaining 30 percent owing will be deposited into individual
accounts.
For payments of healthcare costs, the starting point of payments from thesocially pooled fund shall correspond to 10 percent of the average annual
wages of an employee and the maximum amount of payments payable from thesocially pooled fund shall equal 4 times the average annual wages of theemployee as determined accordingly. Payments of healthcare costs equal to orless than the starting point of payments shall be paid out of the individual
account of the employee or by the employee directly on an out-of-pocket basis.
Payments of healthcare costs greater than the starting point of payments andequal to or less than the maximum amount of payments payable from thesocially pooled fund shall be primarily made from the socially pooled fundwith a certain percentage to be charged to the employee.
New scheme for providing collaborative healthcare insurance inagricultural communities
In 2002, the Decision Concerning the Further Fortification of Health
Programs for Agricultural Communities, which encompassed the developmentof a scheme for health services in agricultural communities and a scheme forcollaborative healthcare in agricultural communities by 2010, was promulgated.
An Opinion on the Solidity and Development of a New Scheme for Providing
Collaborative Healthcare in Agricultural Communities was promulgated in2009 and a Notice on Benefiting from the Construction of a New Scheme for
Providing Collaborative Healthcare in Agricultural Communities in 2012 wascarried out in 2012.
The primary contents of the new scheme for providing collaborative
healthcare in agricultural communities are as follows:
1) Optional enrolment by farmers on a household basis;
422) Financed by insurance premiums paid by individuals and by subsidies
provided by the state. Central and regional government financial organs
contribute a certain amount of dedicated funds each year. Individuals pay
an insurance premium of at least 10 renminbi yuan while the local
government pays at least 10 renminbi yuan per insured person. The central
government in the central and western parts of the country pays 10
renminbi yuan per regional insured person.
3) Insurance covers the costs of treatment for serious illnesses and conditions
and partially covers the costs of some forms of outpatient treatment.
Basic healthcare insurance for urban residents
In order to solve the problem of providing healthcare compensation for
unemployed persons in urban areas, an Instructive Opinion on the Deployment
of Basic Healthcare Insurance for Urban Residents in Test Regions was carriedout in 2007. Coverage was extended to junior high school and primary school
students not covered under a healthcare insurance plan (including students
enrolled at occupational high schools, vocational junior high schools, andtechnical schools), children, and others with enrolment made optional. This
insurance is primarily financed by insurance premiums paid by insured persons
and by subsidies extended by the government. Model cities determine
insurance premiums according to the level of economic development andability to pay. The government provided an annual subsidy of 120 renminbi
yuan per insured person in 2010.
4. Current state of pension security
Pension schemes in China can be broadly divided into four types: basic
pension insurance for the employees of urban enterprises, social pension
insurance for urban residents, new scheme for providing social pension
insurance in agricultural communities, and pension insurance for public-sector
workers (Table 2-9). These insurance schemes are explained below.
(1) Basic pension insurance for the employees of urban enterprises
Basic pension insurance for the employees of urban enterprises wasestablished according to the Decision on the Establishment of a Standardized
Basic Pension Insurance Scheme for Enterprise Employees of July 1997 andthe Decision on Perfecting the Basic Pension Insurance Scheme for Enterprise
Employees of 2005. Covered persons consist of the employees of different
types of urban enterprises (including state-run enterprises, collective urban
enterprises, foreign-affiliated enterprises, and privately run enterprises), selfemployed persons, and irregularly employed workers. For contributions,enterprises pay 20 percent of total enterprise wages and employees pay 8
Chapter 2: China 43

percent of their wages.
For the socially pooled fund and individual accounts, a social insurance
institution will open an individual account for each employee with 11 percentof the individual’s wages. The amount to be paid by the individual will be fully
deposited into his or her individual account. The remaining portion will beearmarked from the contribution amount paid by the enterprise. An increase in
the amount to be paid by individuals led to a reduction in the amount paid into
individual accounts by enterprises by 3 percent. Savings accumulated in an
individual account shall be used only for the pensions of the employee andcannot be paid out in advance. When an employee leaves his or her job, his or
her individual account shall remain with him or her thanks to portability. Upon
the death of an employee or retiree, the amount contributed by the individual
into his or her individual account shall be conferred on the individual while theamount contributed by the enterprise will be added to the socially pooled fund.
With respect to the receipt of a pension, the statutory mandatory age ofretirement is 60 years for men and 55 years for women at enterprises and 50
years for women at plants. When an individual retires upon reaching the
mandatory age of retirement after having made pension contributions for atleast 15 years, he or she shall be paid a monthly pension. A pension comprises
a basic pension and a pension based on an individual account. The amount of
the basic pension that can be received is equal to 20 percent of the average
wages of wage-based workers in each province, autonomous region,
municipality, prefecture, or city while the amount of the individual accountbased pension that can be received is the amount that is equal to the amountaccumulated in the individual’s individual account divided by 120. A person
who has made pension contributions for less than 15 years shall not be entitled
to receive a basic pension and will be paid only the amount accumulated in his
or her individual account on a lump-sum basis.
(2) Social pension insurance for urban residents
The pension insurance scheme for the employees of urban enterprises
covers workers at enterprises, sole proprietors, freelance workers, and farmer
mechanics who conclude contracts with employers. Pension security is notavailable to persons not entitled to obtain coverage under the basic pension
insurance scheme for the employees of urban enterprises due to being
unemployed or for reasons of employment instability. A new scheme forproviding social pension insurance in agricultural communities was establishedand demands were made from various quarters for the establishment of a social
pension insurance scheme for urban residents. A social pension insurance
scheme for urban residents was established on a test basis in 2011 in an effort
to provide pension coverage to all citizens with the aim of offering a Chineseversion of universal pensions.
44

Table 2-9. Comparing basic pension for urban employees, social pension for
urban residents, and a new scheme for providing social pension inagricultural communities
Basic pension insurance forthe employees of urban
enterprises

Social pension insurance forurban residents

New scheme for providing
social pension insurance inagricultural communities

Relevant
policies

Decision on the Establishmentof a Standardized Basic
Pension Insurance Scheme forEnterprise Employees (issued
by the state, no. 26 of 1997)
Decision on Perfecting the
Basic Pension Insurance
Scheme for Enterprise
Employees (issued by thestate, no. 38 of 2005)

Instructive Opinion of theState Council Concerning the
Implementation of Social
Pension Insurance for Urban
Residents on a Test Basis(issued by the state, no. 18 of2011)

Instructive Opinion
Concerning the
Enforcement of a New
Scheme for Providing Social
Pension Insurance inAgricultural Communities(issued by the state, no. 32
of 2009)

Coveredpersons

Employees of enterprises(including state-run
enterprises, collective
enterprises, foreign-affiliatedenterprises, and privately-run
enterprises), self-employedpersons, and irregularly
employed workers

Urban residents who are aged
16 years or older and who do
not satisfy the conditions forbecoming insured under abasic pension insurance
scheme for the employees ofurban enterprises

Residents of agriculturalcommunities who are aged
16 years or older and who
are not insured under abasic pension insurance
scheme for the employeesof urban enterprises

Compulsory/optional

Compulsory

Optional

Standards
for pension
insurance
premiums

Enterprise pays 20 percent of
total wages and employee
pays 8 percent of wages

Between 100 and 1000
renminbi yuan per year; set
according to one of 10
different grades with rates at
100 renminbi yuan intervals;
can be selected

Between 100 and 500
renminbi yuan per year; set
to one of 5 different gradeswith rates at 100 renminbi
yuan intervals; can beselected

Conditions
forreceiving
pensionbenefits

15 or more years ofcontributions (male: 60 yearsof age; female executive: 55
years of age; general female
employee: 50 years of age)

15 or more years of contributions (60 years of age or older)

Source: Chi Hung Kwan (2012); partially revised by the authors.

An unemployed urban resident who is aged 16 years or older (excluding anactive student) and who does not satisfy the conditions for being covered under
the pension insurance scheme for the employees of urban enterprises has theoption of becoming covered under the social pension insurance scheme forurban residents in the place where he or she is legally domiciled.
Funding for the social pension insurance scheme for urban residents
comprises insurance premiums and government subsidies. Insurance premiums
charged to an insured person are set according to one of 10 different grades
Chapter 2: China 45

with rates between 100 and 1000 renminbi yuan per year. The number ofdifferent grades can be increased by a local government in response to local
circumstances. While the grade can be freely selected, the higher the insurance
premiums paid the higher the pension amount that can be received. A local
government will provide a subsidy of at least 30 renminbi yuan per person
each year. A pension comprises a basic pension and individual account-based
pension and will be paid to the end of the individual’s life. The standard
amount of the basic pension as determined by the central government is 55
renminbi yuan per month per person and will be paid to a pension contributor
from the age of 60 years. A person who is not covered under the pension
insurance scheme for the employees of urban enterprises or another pension
scheme and who is 60 years of age at the time this scheme is implemented
shall be paid a monthly pension without having to pay insurance premiums. If
there is less than 15 years to go until a person reaches the age at which he or
she can receive pension payments at the time this scheme is implemented, thenthe shortfall in insurance premiums will be paid according to the number ofyears in question. If there is at least 15 years to go until a person reaches theage at which he or she can receive pension payments at the time this scheme isimplemented, then at least 15 years of insurance premiums shall be paid
according to the number of years in question.
(3) New scheme for providing social pension insurance in agriculturalcommunities
It used to go without saying that elderly persons in agriculturalcommunities were supported economically by their families. In accordancewith the Decision of the Central Committee of the Chinese Communist Party
Concerning Some Issues with the Completion of the Socialist Market
Economic System in 2003, a pension insurance scheme for agriculturalcommunities was instituted with a focus on households that became a basic
policy for pension insurance in agricultural communities. After this new
scheme for providing social welfare pension insurance in agriculturalcommunities was implemented on a test basis in Shandong Province andelsewhere, three parties—individuals, collectives, and the government—came
to assume the burden of providing pension funds. The promulgation of theInstructive Opinion Concerning the Enforcement of a New Scheme for
Providing Social Pension Insurance in Agricultural Communities in 2009 led to
the full-scale implementation of this new scheme for providing social pension
insurance in agricultural communities (hereinafter referred to as “newagricultural pension insurance scheme”).
A resident of an agricultural community who is aged 16 years or older(excluding an active student) and who is not covered under the pension
insurance scheme for the employees of urban enterprises shall have the option46

of obtaining coverage. Insurance premiums consist of payments made by theindividual and the collective (village or a township or village enterprise) as
well as subsidies provided by the government. Insurance premiums charged to
an insured person are set according to one of five different grades with rates
between 100 and 500 renminbi yuan per year at 100 renminbi yuan intervals.
The insurance premium can be freely selected by the covered person. The
central government pays 55 renminbi yuan per month per person while thelocal government pays at least 30 renminbi yuan per month per person. The
new agricultural pension insurance scheme conforms to the same form as theframework for the basic pension insurance scheme for urban employees(socially pooled fund and individual accounts). Covered persons are entitled toreceive a pension from the age of 60 years and even elderly persons inagricultural communities who are not entitled to receive a pension for theemployees of urban enterprises are entitled to receive a pension under thisscheme. An elderly person in an agricultural community who is not eligible tobe covered under the pension insurance scheme for the employees of urban
enterprises and who is 60 years of age or older at the time this new scheme forproviding social pension insurance in agricultural communities is implemented
shall be paid a monthly basic pension without having to pay insurance
premiums. If there is less than 15 years to go until a person reaches the age at
which he or she can receive pension payments at the time this scheme isimplemented, then the shortfall in insurance premiums will be paid according
to the number of years in question. If there is at least 15 years to go until aperson reaches the age at which he or she can receive pension payments at thetime this scheme is implemented, then at least 15 years of insurance premiums
shall be paid according to the number of years in question.
(4) Pension insurance for public-sector workers
In response to the promulgation of the Method for Processing Resignationsof Staff Members of Each Level of the People’s Government (provisional) in
1952 as well as the Method for Processing Resignations of Staff Members ofState Institutions (provisional) and the Method for Processing Compulsory
Resignations of Staff Members of State Institutions Who Reach the Age ofRetirement (provisional) in 1955, a pension insurance scheme for employees atnational institutions and other business units was launched. Retirement money
for public-sector workers is paid by the state and managed by the Departmentof Labor. To be entitled to receive this money, male workers must be aged 60
years or older and have worked continuously for 25 years or more while female
workers must be aged 55 years or older and have worked continuously for 20
years or more. The pension amount equals between 50 and 70 percent of wages.
The financing of pensions is assumed by the government. Thus was establisheda pension-based preferential treatment scheme for public-sector workers,
Chapter 2: China 47

thereby giving rise to a dual-track system of pension schemes 10 . After the
Cultural Revolution, the pension scheme that had been in place since 1958 was
abolished in June 1978 and underwent a separation between enterprises on the
one hand and state institutions and business units on the other. Pensions forenterprise laborers are paid by the enterprise while pensions for public-sector
workers belonging to state institutions and business units are assumed by thestate. Conditions applicable to the mandatory age-limit retirement of enterpriselaborers were adjusted under this same scheme and the pension amounts
receivable for mandatory age-limit retirement were raised.
5. Future issues concerning social security programs
Differences among social security programs
As explained above, the Chinese government has been developing policies
and laws for social security programs since the 1990s. In 2010, a basic
framework for social security programs was completed. While there are manysocial security elements and comparatively favorable benefits offered to certain
people within this framework, however, the opposite can be said for certain
other people. For example, although public officials (such as public-sector
workers) at public institutions and business units do not pay pension insurance
premiums, the employees of general enterprises, farmers, and unemployedpersons in urban areas are required to pay pension insurance premiums. The
ratio of pension-benefit levels is as follows: 1:1:20:41, which corresponds to[elderly farmers]:[elderly urban residents]:[enterprise retirees]:[retired publicsector workers]. The ratio of insurance premiums for healthcare security is asfollows: 1:1:8:12, which corresponds to [farmers]:[elderly urban
residents]:[enterprise retirees]:[public-sector workers]. While government
institutions, enterprises, and business units offer childcare insurance forchildbirth, farmers are not covered. While workers’ accident compensation
insurance is provided to the staff members of state institutions, business units,
and enterprises, farmers lack this form of insurance and are thus placed in an
unfavorable position. Although social-insurance programs need to reduce
economic disparities, improvements in this area are not happening. The newscheme for providing social pension insurance in agricultural communities was
integrated with the social pension insurance scheme for urban residents in 2014
with the aim of ameliorating economic disparities. China is beset by interregional gaps in development and disparities between urban areas andagricultural communities. These issues are not just blocking balanced
development of the economy and society in general but are also importantelements impeding the process of urbanization.

48

Threats to which the financial administration of social security is exposed
The current financial administration of social security is faced with anumber of problems.
1) The aging of insured persons is proceeding apace. Aging results in a greater
amount of benefits being paid out than insurance premiums being paid in,such that this issue is tied to the design and operations of social-insurance
schemes.
2) The system by which social-insurance premiums are paid is not fully
developed. There are inconsistencies in terms of the insurance premiums
being paid by business operators and enterprises that under-report total
wages in order to evade their obligation to pay insurance premiums.
3) The yield on investments of social-insurance funds is poor. While socialinsurance funds are primarily managed by banks, the yield obtained is poor
since these funds are being invested through the acquisition of government
bonds.
Issues concerning the system for managing and operating social security
The government aims to establish universal healthcare insurance andpensions in order to eliminate societal disparities in accordance with the slogan
of creating a harmonized society. Social-insurance programs have evolved
dramatically in recent years. Since the founding of the People’s Republic ofChina in October 1949, however, a dual-track social system has been in placein urban areas and agricultural communities and a system of family registers inurban areas and family registers in agricultural communities continues to be
maintained to this day. Most social security programs today are closely tied tofamily registers, such that healthcare insurance, social relief, social welfare,public services, and other programs have not been developed for the migrant
population even as people migrate from agricultural communities to urban
areas in search of migrant work.
Issues concerning the ability to take charge of social security affairs
While there are many service items and while the scope of applicable
services is expanding in terms of social security affairs, there just are notenough persons in charge of these affairs. In particular, the cultivation of
persons with high levels of expertise is inadequate. The development of social
security experts with specialized knowledge is vital for designing andoperating sustainable social security programs. Given the fluid nature of
persons covered by social security and the ease with which personal
circumstances can change, computerized networks need to be built and asystem for managing social security information on a standardized basis
nationwide should be developed.
Chapter 2: China 49

1

PRC National Bureau of Statistics (2014).
Written and edited by Wang Wenliang (2008), pp 82-83.
3
Ke Long (2013).
4
PRC State Council Information Office (2004).
5
China’s system of family registers can be traced back to the enactment of regulations
governing the registration of family registers in 1958. The State Council promulgatedRegulations of the Department of Public Security Governing the Transferring of Family
Registers in 1964. These regulations essentially banned the transferring of family
registers from agricultural communities to urban areas. This caused the system offamily registers for the citizens of China to become divided into family registers forurban areas and family registers for agricultural communities. All citizens had toregister their family registers in the place of their permanent domicile, such thatsomeone with a parent whose family register is based in an agricultural community
would inevitably be unable to move away from his or her land and would be deprivedof his or her freedom to choose an occupation. After the implementation of the reformand opening-up policy, economic growth led to a reduction in the large flows of
migrant workers from agricultural communities to urban areas. Calls for reforms to thefamily register system are also on the rise and are yielding results in the form ofreviews.
6
Megumi Miyao (2013).
7
Website of the PRC Ministry of Education.
8
Classroom integration: An approach to educating disabled children that involves
having disabled students educated in classes at a normal school.
9
Website of the China Disabled Persons’ Federation.
10
This reference to a dual-track system of pension schemes is made by comparing
pension schemes to multiple rail lines. In other words, the system of pensions in China
operates on a dual basis with differences existing in terms of government and private.
An urban employee pays insurance premiums and receives low pension amounts
whereas public-sector workers and other public officials do not pay any insurance
premiums out of their own pockets and receive high pension amounts. Given thisdisparity in pension amounts, the government scheme is more favorable.
250

Chapter 3: South Korea
Jung-Nim Kim
1. Overview of South Korea
Location
The Republic of Korea (hereinafter referred to as “South Korea”) consistsof the peninsula that juts out towards the southeast from the northeastern edgeof the Asian continental landmass and more than 3,200 islands of various sizes.
Korea (North and South) measures 99,600 square kilometers (45 percent of thetotal area of the Korean Peninsula) in area, abuts China and Primorsky Krai
(Russia) in the north, and faces Japan across the Korea Strait in the south.
Korea (North and South) sits between 33 and 43 degrees north latitude andbetween 124 and 132 degrees east longitude. The center of the peninsula sits at
127 degrees, 30 minutes east and 38 degrees north.
Population and aging rate
The total population of South Korea was 49,410,000 in 2010. As of 2010,
the average lifespan of males was 77 years while the average lifespan of
females was 83 years. It is expected that these figures will continue to go up in
the future. however, the total fertility rate—in other words, the number ofchildren a woman will give birth to in her life—declined from 4.53 in 1970 to
1.21 in 2010 (Table 3-1). While the population of elderly persons is going up
with each passing year, the population of young people—in other words, thepopulation of people who are expected to support the elderly population in the
future—is going down from year to year. The elderly and the young are each
expected to account for about the same percentage of the total population in
2020. After peaking at 52,160,000 people in 2030, the total population is
projected to shift gears and shrink from that point forth.
South Korea became an aging society (where the elderly populationaccounts for 7 percent or more and less than 14 percent of the total population)in 2000. It is expected that South Korea will become an aged society (where
the elderly population accounts for 14 percent or more of the total population)in 2017, which means that the country will transform from an aging society
into an aged society at a faster pace than that of other advanced countries. Thus,
the reduction in the total fertility rate has been causing only the elderly
population to rise as a percentage of the total population and more questions tobe asked with respect to the way in which social security is being provided.
The development of social security measures has become an urgent matter.

Chapter 3: South Korea 51

Table 3-1. Demographic changes
Fiscal year

1970

1980

1990

2000

2010

31,224

38,12442,86947,27549,410Female

58.7
65.5

61.8
70.0

67.3
75.5

72.3
79.6

77.0
83.3

Total fertility rate

4.53

2.83

1.59

1.47

1.21

Rate of dependent population
Population of the young (0-14 years of age)
Elderly population (65 years of age or older)

77.2
6.1

54.3
6.2

37.0
7.2

29.2
10.2

16.1
11.0

Total population (thousands of people)
Average lifespanMale

Source: Comprehensive Population and Housing Survey, Future Population Estimates as released by the National
Statistical Office for each fiscal year.

Table 3-2. Household constitutive form and average number ofhousehold members
Single-personhouseholds

Households
consisting ofmarriedcouple only

2-generation
households

3-generation
households

Averagenumber ofhouseholdmembers

4-generation
households

1975
1985

4.2
6.9

6.7
9.6

68.9
67.0

19.2
14.8

5.1
4.1

1.0
0.5

1995

12.7

12.7

63.3

10.0

3.3

0.2

2005
2010

16.2
17.5

16.2
17.5

55.4
51.3

7.0
6.2

2.9
2.7

0.1

Fiscalyear

Note: Two-generation households are households consisting of married couple + children, grandparents +grandchildren, and married couple + parents.
Source: Population and Household Comprehensive Survey Report as released by the National Statistical Officefor each fiscal year.

The numbers of three-generation households and two-generation
households continue to decline, which means that the average number ofhousehold members can also be seen to be undergoing a constant decline(Table 3-2). Safety checks and other measures carried out from the standpointof local networks will become more and more important in order to keep
physically weak elderly people at ease and prevent them from becoming
isolated from their communities.
State of the economy and politics
While Korea gained its independence from Japan in 1945, the country was
split into North and South, with the South becoming democratic and the North
becoming communist. The tension between North and South remains ongoing
today. The historical context behind South Korea’s current economic andpolitical situation is outlined below in simplified form.
52First, the era of the Syngman Rhee administration (1948-1961) took place
after the founding of the Republic of Korea. The standard of living of thepeople in such terms as lack of infrastructure development and food shortages
was wretched, such that the country relied on food aid provided by the UnitedStates. Politically, political and economic confusion persisted after the Korean
War (June 1950 to July 1953). Defense costs and spending on domestic public
security accounted for 42 percent—about half—of the national budget in 1954.
Domestic industry consisted primarily of primary industries. Economic
development accounted for just 15 percent of the budget in the same year.
Second, the administration of Park Chung-hee (1962-1979) began with thecoup d’état of May Sixteenth in 1961. In the 1971 election, Park Chung-hee,feeling the heat of the opposition party nominee for the presidency, called forsupport by leveraging local sentiment and deployed measures through a
combination of the unfair distribution of benefits to local areas and support for
the administration. As a result, regional discrimination against Jeolla Provinceremains in effect. Economically speaking, a five-year medium-term economic
development plan was put into effect in 1962 and other structural economic
reforms were proactively pursued. Exports surpassed 10 billion dollars in 1977
and per-capita income rose above 1000 dollars in 1978. Fiscally speaking, thegovernment posted a 7 percent budgetary surplus for the first time in 1979. The
rapid growth of the economy at this time was also referred to as the Miracle on
the Han River (a waterway that flows through the downtown core of Seoul).
However, Park was assassinated on October 26, 1979, an event that marked theend of the era of the Park administration.
Third, the era of the administration of Chun Doo-hwan (1980-1987) beganwith a bloody crackdown in the Gwangju democratization movement of May
18, 1980. Subsequently, Chun Doo-hwan was elected as president in an
authoritarian election and was thereafter limited to a single 8-year term aspresident. Pressure was applied to those who opposed his administration andconflicts with university students and workers did not cease. In the economic
realm, policies that prioritized the economy gave rise to a budgetary surplus in1984. Although measures to stabilize consumer prices were taken, the cozy ties
characterizing the interdependent relationship between the conglomerates andthe government became a worsening problem.
Fourth, the era of the administration of Roh Tae-woo (1988-1992) saw Roh
Tae-woo become president in the first direct, free and fair election to be held
since the founding of the country for a single term that lasted 5 years. The
duration of a single term of a presidency remains unchanged to this day.
Disparities between urban areas and agricultural communities and between therich and poor emerged as social issues and the cozy ties characterizing theinterdependent relationship between the conglomerates and the government
were exposed. At 31 percent, defense costs accounted for the largest share ofgovernment spending in fiscal year 1988, followed by education, at 21 percent,
Chapter 3: South Korea 53

and economic development, at 15 percent. At the same time, the Seoul
Olympics were held in 1988 to showcase the country to the world at large. In
the same year, South Korea joined the United Nations along with North Korea
and otherwise began to engage in diplomatic relations with communist
countries.
Fifth, the era of the administration of Kim Young-sam (1993-1997) brokewith convention by having a leader who did not have a previous military
background. Thus, a civilian government headed by a civilian emerged for the
first time in the history of South Korea. In order to eradicate the cozy ties
between politicians and economic groups, the administration introduced a realname financial system to render the flow of financial assets more transparent.
South Korea joined the Organization for Economic Co-operation andDevelopment (OECD) in 1993, surpassed 10,000 dollars in per-capita income
and 100 billion dollars in exports in 1995, and achieved a 5-year average
economic growth rate of 7 percent. However, the Asian currency crisis (IMFcrisis) occurred in 1997 and caused serious economic damage to the country. In
addition, local fiscal grants were distributed and attempts were made to
decentralize power.
Sixth, the era of the administration of Kim Dae-jung (1998-2002) beganwith the first change of government between opposing parties since thefounding of the country and is also known as the era of the people’s
government. A policy of productive welfare was deployed to overcome theeffects of the Asian currency crisis (IMF crisis). Productive welfare consists of1) the guaranteeing of a minimum standard of living, 2) welfare that focuses onhuman development through investments in human resources, and 3) the
participation of workers, employers, their representative organizations,
governments, elements of civil society, and various other actors. While the real
GDP in 1998 was negative 7 percent, efforts were undertaken to achieve an
economic recovery, such as by endeavoring to achieve a 5-year average
economic growth rate of 5 percent. A policy of reconciliation towards North
Korea—referred to as the Sunshine Policy—was launched.
Seventh, the era of the administration of Roh Moo-hyun (2003-2007)
introduced the concept of participatory welfare (involving a government
operating through the participation of the people). The economy began to growagain in 2004 and stabilized with a 5-year average economic growth rate of 4
percent and an average consumer price index of 3 percent. The Sunshine Policy
continued to define South Korea’s dealings with North Korea. After leaving
office, Roh Moo-hyun was subject to an investigation that looked into
allegations that he, along with his aides and family members, had accepted
bribes. In May 2009, he committed suicide.
Eighth, the era of the administration of Lee Myung-bak (2008-2012)
implemented a policy of repression against forces critical of the current
administration. Economically speaking, this administration proclaimed the 747
54

Plan (a policy for achieving a 7 percent rate of economic growth) for which 22
trillion won were invested in the Four Major Rivers Project. This project,however, was heavily criticized for failing to produce any significant results.
The 4-year average economic growth rate between fiscal years 2008 and 2011
was 3.1 percent but average consumer prices rose by 3.6 percent and averagegasoline prices increased by 6.3 percent. The cozy ties between the governmentand conglomerates became a societal concern as did social disparities asrevealed in figures showing that the middle class was shrinking (71.7 percent
in 2000, 69.2 percent in 2005, and 67.5 percent in 2010) and that the ranks ofthe poor were growing (9.2 percent in 2000, 11.9 percent in 2005, and 12.5
percent in 2010).
Local governments
While South Korea had been subject to an extended period of central
government rule since the time of the administration of Park Chung-hee, theheads of local governments and members of local assemblies began to beelected into office during the administration of Kim Young-sam. Local
governments were created under a framework of constraints placed on
administrative roles and fiscal resources in the area of general administration.
In connection with the administration of Kim Dae-jung, a pledge was madeduring the presidential election to transfer functions of the central government
to local authorities. The Law on Promoting Devolution to Local Authorities
was enacted in 1999 after Kim Dae-jung took office. This had the effect ofgiving greater precedence to local governments over the state. While theCommission on Devolution Promotion to Local Authorities was set up under
the direct control of the president, greater emphasis was placed on the balanced
development of the state than on decentralization, such that economic support
for low-developed regions was given greater weight.
In connection with the administration of Roh Moo-hyun, a pledge was also
made during the presidential election to engage in the sustained transferring ofcentral administrative affairs to local authorities. After Roh Moo-hyun took
office, efforts were carried out in hopes of achieving decentralization, as can beseen in the establishment of the Commission on Government Innovation and
Decentralization, the formulation of a roadmap on government innovation anddecentralization, the enactment of the Decentralization Special Law, and theformulation of a 5-year comprehensive plan for the implementation ofdecentralization. In 2004, Incheon, Busan/Jinhae, and Gwangyang were
designated as free economic zones (FEZ) for the primary purpose of attracting
foreign capital and stimulating local economies in designated areas through tax
cuts, deregulation, and other forms of preferential measures. In this and otherways, many decentralization concerns were identified and solutions for theseconcerns were accordingly promoted.
The administration of Lee Myung-bak enforced the Special Law on
Chapter 3: South Korea 55

Decentralization Promotion and established the Decentralization Promotion
Commission in 2008 and formulated a comprehensive plan for the
implementation of decentralization in 2009. A basic comprehensive plan on
reorganizing the system of local administration was also formulated in 2012. In
seeking to widen the area under the jurisdiction of local governments andintegrate local governments, the central government unilaterally pursued acourse for the reorganization of the system of local administration. As the coreelement of regional policies, the concept of “5+2 wide-area economic zones”
was promoted, such that the 16 nationwide wide-area local self-governing
bodies in existence at the time (nine provinces, the special city of Seoul, andsix metropolitan cities) were reorganized into five wide-area economic zones
and two special wide-area economic zones. By promoting a wide-area regional
strategy that went beyond the existing administrative framework, the global
competitiveness of local industrial economies was reinforced.
Features of social security
Social security in South Korea is rooted in neo-liberalism, which endorses
the view that the state only needs to be responsible for the poor and theunemployed. Neo-liberalism essentially protects the freedom and assets ofindividuals and emphasizes the remediation of any unfairness tied to market
competition as well as the equality of market competition.
Social security in South Korea was codified through the stipulation ofEfforts Concerning Social Security for the State in the fourth constitutional
amendment of 1960 and the enactment of the Law on Social Security in 1963.
The term “social security” has been in use since the constitutional amendmentof 1980. Social security consists of social insurance, public assistance, social
welfare services, and other relevant welfare schemes provided to protect all
citizens from such social risks as illness, disability, old age, unemployment,
and death; solve the problem of poverty; and improve the quality of the lives ofthe people.1
South Korea’s first social-insurance scheme was the Law on Industrial
Accident Insurance (industrial accident insurance) that was enacted in 1963
and went into force in 1964. The industrial-accident insurance scheme was aninsurance scheme designed to protect the livelihood of workers who sustain adisaster-caused injury or harm resulting from an occupational injury, illness,
physical disability, or death and their families. A national health insurance
scheme was enacted in 1963 but was put into force for business sites with large
workforces in 1976 before it was gradually expanded to provide healthinsurance coverage to everyone in the nation. The National Pension Law wasenacted in 1973 to provide for citizens who are unable to earn an income due toold age, disability, death, or other such circumstances but was put into force infiscal year 1988. An employment insurance scheme was put into force in 1995
as part of an integrated set of policies in conjunction with an unemployment56

insurance scheme, employment stability scheme, job skills development
scheme, and other such programs. A nursing care insurance scheme (Law on
Long-Term Medical Treatment Insurance for the Aged) was put into force inJuly 2008 in response to the recognition of nursing-care issues affecting theelderly as the biggest factor for insecurity in the lives of the elderly in theirpost-retirement years.
Social security insurance premiums used to be collected by 3 different
public insurance corporations (National Health Insurance Corporation,
National Pension Corporation, and Labor Welfare Corporation). Since fiscal
year 2011, however, the insurance premiums for 5 different social security
schemes (health insurance, long-term medical treatment insurance for the aged,
pension insurance, industrial accident insurance, and employment insurance)
have been collected solely by the National Health Insurance Corporation.
The provision of social insurance in South Korea is behind that of Japanand other advanced countries. Spending on social security is relatively small interms of scope and amount. For these reasons, the burden of insurance
premiums has also been kept in check. In other words, social security programsin South Korea are characterized by 1) an assumption that elderly parents will
be economically supported by their children and 2) a reliance on family
members to rear children and provide elderly nursing care. (The degree of
reliance on wives and daughters-in-law is especially high (Table 3-3).)
Table 3-3. Benefits to be obtained from and the financial administration of
the five big social insurance schemes
Classificati
onHealth insurance

Ministry inchargeLong-term medical
treatment insurance
for the aged

National
pensionMinistry of Health and Welfare

Industrialaccident
insurance

Employment
insurance

Ministry of Labor

InsurerNational Health Insurance Corporation

National
PensionCorporation

Labor Welfare
Corporation

Ministry of
Labor

Date
enforced

July 1997

July 2008

January 1988

July 1964

July 1995

Insuredpersons

All citizens

Persons enrolled in
All citizens
health insurance

Places of business with at least
one full-time worker

Disparity inbenefits

Equal benefits

Equal benefits

Tied to income

Tied to income

Mode offinancialadministrat
ion

Assessment plan
Binary(workplace, local
area)

Reserve-financing
plan
Unitary

Revised reserveAssessment
financing plan
plan
Unitary

Tied toincomeRevisedreservefinancing plan

Source: Social Insurance Information System http://www.4insure.or.kr/ptl/guid/cntr/SoclItdnLayout.do

Chapter 3: South Korea 57

2. Current state of social welfare
Current state of welfare for the elderly(1) Services prior to the adoption of a nursing-care insurance schemea) Facility services: Admission facilities prior to the introduction of anursing-care insurance scheme were categorized into free facilities, low-costfacilities, and charged facilities according to the extent that each elderly patient
could pay for admission. These facilities consist of homes for the aged
comprising live-in welfare facilities for the aged and medical treatment andwelfare facilities for the aged as well as medical treatment facilities andspecialized medical treatment facilities and were differentiated according to thehealth condition of each admitted patient. Free facilities are used by people on
welfare while low-cost facilities were used by income earners earning less than
the average income of typical households with urban workers. While homes forthe aged admit persons who are 65 years of age or older and who are capableof engaging in independent living in their day-to-day lives, medical treatment
facilities admit elderly persons who are aged 65 years or older and who areincapable of living independently in their day-to-day lives. In 1988, a facility
in Gyeonggi-do Yudang Village became the first fee-charging facility to open
and operates on the premise that admitted persons shall pay costs in full as theywould in Japan.
Operators of admission facilities generally consist of the state and local
governments. If another person wishes to operate a facility, a declaration needs
to be made to the governor, mayor, county magistrate, or district head (head ofthe local government) (Paragraph (2) of Article 33 of the Law on Welfare for
the Aged). Specialized hospitals for the aged are opened under the Medical
Treatment Law and require permission to be granted by the mayor or governor
with jurisdiction over the relevant location.
b) Housing welfare services: Housing welfare services include home
service dispatching services (nursing care provided by visiting care providers),
day services (presently consisting of weekly and nighttime services), and shortstay services. 1) Home service dispatching services have been provided by
Korean welfare centers for the aged since 1987 but were adopted as official
services for the first time by the city of Seoul in 1996. Helpers are referred toas domi, a term that means mutual assistance. 2) Visiting services (visiting
domi services for the provision of housekeeping and nursing-care functions)were first provided to elderly persons on welfare in 2001. Since then, they havebeen expanded to enable their provision to low-income disabled persons andyoung persons. The costs of these services are covered by a portion of lottery
revenues. 3) Day services were begun in 1992 and 4) short-stay services havebeen operated since 1994.
At-home facilities are generally operated by the state and local
governments. If another person wishes to operate a facility, the establishment
58

of a location needs to be declared to the governor, mayor, county magistrate, or
district head (Article 39 of the Law on Welfare for the Aged).
(2) Current state of the nursing-care insurance schemea) Insurers and insured persons: Having been implemented in July 2008,
the nursing-care insurance scheme (long-term medical treatment insurance
scheme for the aged) is the latest social-insurance scheme to be adopted in
Korea. The sole operator of the nursing-care insurance scheme (insurer) for theentire country is the National Health Insurance Corporation. The state and local
governments are called upon to support the insurer.
Insured persons enrolled in the nursing-care insurance scheme consist of
everyone enrolled in the national health insurance scheme. Insurance premiums
are set according to income level.
b) Persons covered by services, procedures to be followed by service users,and classifications for certifying nursing-care need: Persons eligible to receive
nursing-care benefits consist of elderly persons aged 65 years or older andpersons who are less than 65 years of age and who suffer from dementia, acerebrovascular disease, or other disease or condition associated with old age.
The procedures for using nursing-care services from application to usage
are as follows:
1) Submit a written application to be certified as requiring nursing care to thenursing-care insurance office within the Health Insurance Corporation(application). Attach a written opinion provided by the applicant’s personal
physician.
2) An official from the Health Insurance Corporation will pay a direct visit to
the applicant’s home to conduct an examination of the physical and mental
state of the applicant (visit examination).
3) A computerized system will conduct a primary assessment according tounified nationwide standards with the examination form completed by thecertification examiner (assessment).
4) A nursing-care certification review board comprising healthcare, medical,
and welfare experts and other informed parties shall grant certification(certification).
5) A nursing-care level certificate will be sent by post. A model care plan will
also be sent at the same time (certificate sent).
6) The person certified as needing nursing care will be entitled to use various
services upon concluding an agreement with the service provider (contractconcluded and services utilized).
The classifications of levels of nursing-care need certification range fromClass 1 to Class 4, where those categorized as Class 1 require the highest levelof nursing care and those categorized as Class 4 require the lowest level ofnursing care, and Class 5 (dementia). The more serious the need for nursing
care, the higher the assigned nursing-care level certification score (which isinversely related to level).
Chapter 3: South Korea 59c) Framework of the nursing-care insurance scheme: The structure offinances for nursing-care insurance is such that the state pays 20 percent of theannual nursing-care insurance premiums for each fiscal year while the local
government pays nursing-care benefit expenses and the costs tied to written
observations and diagnoses prepared by physicians and written instructions
provided by visiting nurses. Nursing-care insurance premiums paid by users
account for 50 percent of the source of funds for this scheme while co-payment
amounts paid by users when using at-home services and facilities account for
15 percent and 20 percent, respectively. While welfare recipients (recipients ofa basic national subsistence guarantee) pay nothing out-of-pocket as costs are
fully covered by the public, 80 percent of these benefit expenses are paid by
the state while the remaining 20 percent are paid by local governments.
Table 3-4. Outline of the nursing-care insurance schemeName

Law on Long-Term Medical Treatment Insurance for the Aged

InsurerNational Health Insurance Corporation

Insured persons

Persons enrolled in national health insurance scheme

Persons entitled tobenefits

Elderly persons and persons requiring nursing care due to affliction with anillness or condition commonly associated with aging

Service application

Written opinion by personal physician  application  examination forcertification  primary assessment by computer  secondary assessment by
the nursing-care certification review board

Level of nursing-careneedClass 1, Class 2, Class 3, Class 4, Class 5 (dementia)

Insurance financing

Public funds 20 percent (80 percent state, 20 percent municipality) + municipality(fully free for welfare recipients, low-income persons required to pay 50 percent)Set to 10 percent or less of medical treatment insurance premiums (5.89 percent)Nursing-care insurance premiums (6.55%)

Amount paid by serviceuser

At home 15 percent, facility 20 percent

Collection of premiums

Added to health insurance premiums

Participation of forprofit enterprises

At-home nursing care and admission facilities: entry possible

Care plan production

Produced based on the level of nursing-care need without taking into accountthe opinions of government corporation staff members and certifying persons

Service usage

Contract concluded with business location (care-plan free)Service types
At-homeservices

Visiting nursing (attendance) care, visiting bath services, visiting nursing care, dayservices, short-term admission, welfare tools

Facility
admission

Medical treatment facilities for the aged (special medical treatment homes forthe aged), medical treatment and shared-living homes for the aged (grouphomes)

Produced by the author.

60

Users of facility services pay 20 percent of incurred costs (and the costs offood and residence in full) and the users of at-home services pay 15 percent of
incurred costs. Low-income earners pay 50 percent of the portion of copayment while the remaining 50 percent is paid by the state and local
governments. A recipient of a subsistence guarantee shall not pay for nursingcare insurance premiums and shall pay nothing for using services.
With respect to the types of nursing-care services that are provided, itshould be noted that facility services include special medical treatment homes
for the aged (medical treatment facilities for the aged) and group homes(medical treatment and shared-living homes for the aged). Group homes canadmit not just elderly persons with dementia but also elderly persons withphysical disabilities. At-home services include visiting attendance care (homehelp), visiting bath services, visiting nursing care, day services, short-termstay-based living care (short stays), and the renting and purchasing of welfare
tools.
Cash benefits include special cash benefits to pay for family medical
treatment costs, special medical treatment costs, and the costs of hospitalattendants for medical treatments. Cash benefits are available to caregivers
with care helper qualifications (medical treatment care workers) who care forfamily members. For family medical treatment costs, 150,000 won per monthare paid to caregivers who care for family members in villages that lack carecenters in remote mountainous areas or on remote islands. If care services areprovided by a family member with care helper qualifications to a person
certified as needing nursing care, cash benefits will be provided but the amountof care benefits involved will differ depending on whether the care provider isliving together with or separate from the person certified as needing nursing
care. For the costs of hospital attendants for medical treatments, the costs ofnursing care attendants are supposed to be paid when the person requiring
nursing care is admitted to a special hospital for the aged or a medicaltreatment hospital but this benefit has not yet been implemented as insurance
finances are not up to scratch.
d) Current state of the utilization of nursing-care services: The percentage
of elderly persons comprising applicants requiring nursing care increased from
7.4 percent in 2009 to 10.7 percent in 2013. The number of persons certified as
requiring nursing care increased from 214,000 in 2009 to approximately
350,000 in 2013. In breaking these figures down by level of nursing-care need,
we see that, in the years between 2009 and 2013, there was an increase from
161,000 to 240,000 persons for level 3, no change from 71,000 persons forlevel 2, and a decrease from 54,000 to 37,000 persons for level 1. The
percentage of elderly persons comprising persons certified as requiring nursing
care stood at 5.4 percent in 2009 and has remained at 5.7 percent since 2010.
Service users accounted for the percentage of persons certified as requiring
Chapter 3: South Korea 61

nursing care for each of the following years as follows: 82 percent in 2009,89.9 percent in 2010, 89.1 percent in 2011, and 88.2 percent in 2012. The factthat there is a high rate of service usage necessitates consideration of the highrate of cash benefits paid to family members with care helper qualifications.
Welfare for the disabled(1) Process by which laws for the disabled have evolved
Persons with disabilities are “people with physical disabilities… andpsychological disabilities who have suffered substantially in their daily living
or social life over many years due to disabilities” (Article 2 of the Law on
Welfare for Disabled Persons).
The Law on Welfare for Disabled Persons was enacted for the first time in1981 as the Law on Welfare for Mentally and Physically Disabled Persons.
The name of this law was changed to Law on Welfare for Disabled Persons in
1989. The provision of education and rehabilitation to disabled persons was
begun with the enactment of the Law on Promoting the Employment of
Disabled Persons in 1990 and the Law on Advancing Special Education in
1993. The Law on Promoting the Accommodation of Disabled Persons, theAged, Pregnant Women, etc., was enacted and promulgated in 1997, which led
to an increase in interest in barrier-free matters (Table 3-5).
Table 3-5. Development of policies for the disabledStage at which relief is offered
and the introduction of schemes
takes place
Up to 1987

Policy expansion stage and stage
at which schemes are maturing
1988-1997

Stage at which schemes are
maturing
1998 to the present

Societal awareness of disabled
persons is weak
Policy for required protection
based on measures and schemes
Policy implemented as part ofsocial welfare
Enactment of the Law on
Welfare for Physically andPsychologically Disabled Persons(1981)
name changed to Law on
Welfare for Referrers

Program of registering disabled
persons begun (1989)
Gasoline costs paid toautomobile owners (1990)
Law on Promoting the
Employment of Disabled Persons
enacted (1990)
Law on Promoting Convenience
for Walking Disabled Persons
enacted (1997)5-year development plan fordisabled persons begun (1998)
Scope of disabilities expanded
Law on Banning Fines toAutomobile Owners enacted(2008)
Basic pension scheme
implemented (2010)
Law on Activity Support comes
into force (2011)

Source: Produced by the author based on Seunggi Lee (2012), National Rehabilitation Institute.

The Korean Women’s NGO Committee established a new sub-section fordisabled persons in 1995 and disabled women’s provisions were added to theCharter on the Population of Disabled Persons and the Law on the Welfare of62

Disabled Person in 1999. In these ways, a framework for reinforcing the rights
of disabled women was formed. A law on remedying discrimination against
disabled persons and violations of the rights of disabled persons was enacted in2007 and put into force in 2008. A law on pensions for disabled persons wasenacted and put into force in July 2010 and a law on providing livelihood
support for disabled persons was enacted and put into force in 2011.
The scaling down of facilities with 100 or more admitted persons to smaller
facilities with a capacity of less than 30 persons constituted the core of the2011 amendments to the Law on the Welfare of Disabled Persons. The 2012
amendments to the Law on the Welfare of Disabled Persons caused “living
facilities for disabled persons” to be renamed “residential facilities for disabled
persons.” Local rehabilitation facilities consisting of short-term protective
facilities and shared-living homes that provide housing and living support wererenamed “housing facilities for disabled persons.”(2) Population of disabled persons and measures to promote the employment
of disabled personsa) Population of disabled persons and the types of disabilities: The
population of registered disabled persons increased from 1,449,000 persons in2000 to 2,519,000 persons in 2011 and is rising from year to year. In looking at
grades of disabled persons, we see that grade 5 disabled persons, at 531,000
persons, are most numerous followed by grade 3 disabled persons (433,000
persons), grade 2 disabled persons (351,000 persons), and grade 1 disabled
persons (210,000 persons).
While the system of registering disabled persons was instituted in 1988, theinadequate development of infrastructure for welfare services and a lack ofunderstanding regarding this national system caused the rate of the registrationof disabled persons to stay below 50 percent for about a decade. With thepassing of the economic crisis that struck South Korea in 1997, welfare
measures for disabled persons were fortified and the rate of registrations rose.
There are presently 15 types of disabilities recognized in the Law on the
Welfare of Disabled Persons (disability involving the limbs, brain lesion
disability, auditory disability, linguistic disability, intellectual disability,
psychological disability, autism, cardiac disability, kidney disability, visualdisability, respiratory disability, hepatic disability, facial disability,
intestinal/urinary disability, and epilepsy). In breaking disabilities down by
type, we see that disability involving the limbs ranked highest in 2010 (53.1
percent), followed by auditory disability (11.9 percent), brain lesions (10.4
percent), visual disability (9.9 percent), and intellectual disability (6.4 percent).
b) Measures to promote the employment of disabled persons: A mandated
employment policy exists as a measure to promote the employment of disabled
persons by compelling businesses to employed disabled persons. In 1991, thescope of this mandated employment policy was expanded to encompass
Chapter 3: South Korea 63

business locations with 300 or more full-time workers. The scope of this policy
was again expanded to cover business locations with 50 or more full-timeworkers in 2004. In order to promote the employment of disabled persons, thestatutory rate of employment was increased to 3.0 percent at public institutions
and 2.3 percent at private-sector enterprises in 2010 from 1.1 percent back in
1991. In terms of the actual rate of employment, public institutions rank
highest at 2.2 percent, followed by government institutions at 1.97 percent andgeneral enterprises at 1.84 percent, such that the actual employment ratecurrently falls short of the statutory employment rate for all categories.
According to the Ministry of Employment and Labor, business locations
obligated to employ disabled persons numbered 22,209 as of December 2009
but only 11,857 locations were in fact employing disabled persons (53.4
percent).
Also according to the Ministry of Employment and Labor, the employment
rate for disabled persons in 2011 was 36 percent, a lower level than theemployment rate for the entire country (60 percent). In looking at areas of
employment, we see that unskilled labor accounts for 30.1 percent of disabled
persons with jobs, a relatively high rate of employment, followed by skilledworkers and clerical jobs, which account for relatively low rates of
employment of 7.1 percent and 6.5 percent, respectively.
In order to promote the employment of disabled persons, employers areprovided financial incentives, subsidies, and assistance to cover employment
administrative expenses and facility improvement costs. Facilities that arepromoting the development of job skills possessed by disabled persons and thatare employing or hiring disabled persons accordingly will be provided free
support in terms of the establishment of rehabilitation facilities, assistance, andrepair expenses. In addition, financing to establish welfare plants for thedisabled; financing to build or make additions to dormitories, obtain work
equipment, or build break rooms and rehabilitation treatment rooms; andfinancing to enable the acquisition of vehicles to transport disabled persons toand from work shall be provided. A business location that has hired newdisabled employees shall be provided with a subsidy for the employment of
disabled persons for two years.
c) Current state of pensions and income security for disabled persons:
Persons entitled to receive a disabled person’s allowance formerly consisted ofholders of disability certificates for class 1 or class 2 disabled persons (or class
3 for persons with an intellectual disability or with a developmental disability),
who are also on welfare (national basic subsistence guarantee). However, thiswas expanded in 2005 to cover all disabled persons receiving a livelihood
protection. The implementation of the Law on Livelihood Protection in 2007
expanded the scope of persons entitled to receive a disability allowance toinclude low-income earning (less than 120% of minimum living cost)64

registered disabled persons under the age of 18 years (disabled persons insecurity facilities shall be paid only a disability allowance irrespective of age)
who constitute persons with a moderate to severe disability (class 1 and 2
disabled persons as well as class 3 intellectually or developmentally disabled
persons suffering from another disability at the same time) or persons with alight disability (class 3 to 6).
The disability allowance amounts to 130,000 won per month for a personwith a moderate to severe disability and 30,000 won per month for a personwith a light disability. The disabled child allowance has been paid since 2007
to children receiving the basic national subsistence guarantee for under 18year-olds and children in low-income earning households and amounts to
200,000 won per month for a child with a moderate to severe disability. The
disability allowance for persons admitted to a disability facility amounts to
70,000 won per month for a person suffering from a moderate to severe
disability and 20,000 won per month for a person suffering from a lightdisability.
A pension scheme for disabled persons was put in place in July 2010. As ofJune 2011, there were 308,000 recipients of a pension for disabled persons and55 percent of persons with a moderate to severe disability (total of 559,310
persons with a moderate to severe disability) were receiving a pension fordisabled persons. This pension for disabled persons amounts to 91,000 to
151,000 won per month for persons with a moderate to severe disability (class
1 and 2 disabled persons as well as class 3 disabled persons with multiple
disabilities).
With respect to the economic circumstances of disabled persons, it should
be noted that the average earnings of disabled persons equaled 1,420,000 won
per month in 2011, or 45.7 percent of the average earnings of all workers(3,110,000 won). The average earnings of households with a disabled person
were 1,980,000 won per month, or a relatively low 53.3 percent of the average
earnings of all households (3,710,000 won). With the relative poverty rate in2009 at 39.8 percent for disabled persons and at 15.7 percent for non-disabled
persons, the relative poverty rate for disabled persons was 2.5 times as great as
the relative poverty rate for non-disabled persons and higher than the 18
percent income average for OECD countries. The relative poverty rate
represents the percentage of people earning less than half the median amountof income in the given country (middle value of all amounts of income ranked
in order from lowest to highest in terms of amount earned).
Welfare spending accounted for 0.3 percent of the government budget in2007. Disability benefits accounted for 0.14 percent of GDP in 2005, which
was less than the average of 1.2 percent for OECD countries. Budgeted
spending on welfare for disabled persons is trending upwards, with 950 billion
won spent in 2008 and 1,948.6 billion won spent in 2012.
Chapter 3: South Korea 65

(3) Services for disabled personsa) Activity-support services: The Law on Supporting Activities by
Disabled Persons was enacted in 2011. This law was passed with the aim ofproviding activity-support services to disabled persons experiencing physicaland psychological difficulties in their day-to-day lives and thereby promoting
independent living and societal participation on the part of disabled persons.
1) Persons entitled to receive services consist of class 1 (severe) throughclass 4 disabled persons between the ages of 6 years and under 65 years
irrespective of income level. 2) Service types consist of activity assistance(physical care, housekeeping services, support for social activities;
accompanying, outings), visiting bath services, and visiting nursing-careservices. 3) With respect to the amount to be paid by the service user, a person
receiving a subsistence guarantee shall pay nothing, a low-income person shallpay 20,000 won, and all other persons of other levels shall pay between 6 and15 percent of costs according to income. The amount to be paid for the use ofservices shall correspond to 5 percent of the national pension for disabled
persons and shall range between 51,600 and 91,200 won. 4) The maximum
monthly amount of service benefits that can be granted shall be 860,000 won
for a class 1 disabled person, 690,000 won for a class 2 disabled person,
520,000 won for a class 3 disabled person, and 350,000 won for a class 4
disabled person. However, benefits will be added to the tune of 166,000 won
for a person living on his or her own, 664,000 won for childbirth assistance,
83,000 won for a low-income household, 166,000 won for a person preparing
to living on his or her own after he or she is discharged from a facility, and83,000 won for an active student.
Rehabilitation services, language development support services, and careservices shall be provided to a family dealing with a childhood disability inorder to lessen the burden on the family of raising a disabled child. The numberof users of such services jumped from 32,571 in 2010 to 43,944 in 2011.
b) Admission facilities: Permission to be admitted to a facility for disabled
persons can be granted by submitting a request to the head of the local
municipality. A facility is unable to refuse to admit a disabled person without avalid reason (Articles 31 and 47 of the Law on Welfare for Disabled Persons).
A disabled person admitted to a facility shall consist of a disabled person
receiving a subsistence guarantee, disabled person without a person under aduty to support the disabled person, or disabled person with a person who isunder a duty to support the disabled person but who is not mentally competent
to fulfill his or her duty. With respect to the amount to be paid by the person
admitted to a facility, a person receiving a subsistence guarantee shall pay
nothing. 30 percent of the maximum number of persons not receiving a
subsistence guarantee to be admitted to any given facility pays less than
167,000 won per month.
66

In 2011, there were 490 admission facilities to which 25,000 persons had
been admitted. Facilities with a capacity of 100 or more persons accounted for17.8 percent (87 locations) of the total number of locations and 41 percent(10,000 persons) of the total number of admitted persons. In the future,facilities with a capacity of 30 or more persons are expected to graduallytransform into smaller-scale facilities with a capacity of less than 30 persons.
The implementation of plans for reduction will cause facilities admitting 100
or more persons to account for 12.2 percent of the total number of locations by2017.
Welfare for children
In South Korea, the two-child policy that had been in place since the 1960s
successfully brought the total fertility rate to below the population replacementlevel of 2.1 in 1983. The birthrate has continued to decline since then, such thatthe total fertility rate in 2003 went down to 1.19, the lowest in the world at thetime. In 2010, it was 1.21. In recent years, the causes of the falling birthrate
include not just the tendency to marry later, the tendency to have children later,
and the increase in the costs of education required to raise children, but also
diminished fertility on the part of couples. The need for couples, including men,to reexamine the way they work and to strike a balance between work andchild rearing has come to be stressed.
In South Korea, the first law concerning welfare for children to be enacted
was the Law on the Welfare of Children, which was enacted in December 1961.
Given the difficulty with which state funding at the time was secured, persons
entitled to protection were restricted. This law reflected a policy of providing
protection for those who really needed it. Amendments to the Law on the
Welfare of Children were later passed by the National Assembly in March
1981 and put into effect in April of the same year. This led to the promulgationof a universal Law on the Welfare of Children that could be applied to all
children of the next generation rather than just to children requiring minimum
levels of protection. The Law on Child-Care for Infants was enacted in 1991 toenable existing daycares to expand into daycares where protection andeducation functions could be consolidated.
In recent years, there have been moves to expand the scope of thechildren’s allowance for infants. A childcare allowance for children who do notattend a facility was introduced in July 2009. A childcare allowance for theprovision of free childcare and free education to children under the age of two
years and children aged five years (within income restrictions on childcare fees
and course fees) was begun in March 2012. In March 2013, a revised childcare
allowance scheme was implemented to give all households raising children(within income restrictions) money to cover childcare fees and a childcare
allowance. The government of South Korea expanded the childcare allowance
Chapter 3: South Korea 67

with the aim of reducing the economic burden on households raising children
and putting the brakes on the declining trend affecting the birthrate at anincreasingly rapid pace.
Children’s homes (hereinafter referred to as “day-care centers”) have been
increasing in number, such that there were 42,527 centers in 2012, a 2.2-foldincrease over fiscal year 2000. However, state and public day-care centersaccount for a mere 5.2 percent (2,203 centers) of the total number of centerswhile private-sector day-care centers (including home day-care centers)
account for 87.9 percent (40,061 centers) of the total number of centers. The
number of children using day-care centers was 686,000 in 2000 and more thandoubled to 1,487,000 in 2012, of which the users of private-sector day-care
centers numbered 1,140,000. The increase in the number of private-sector daycare centers reflects the social issue of children on waiting lists to be accepted
into centers due to the impact of dual-income households and other suchfactors. The 1998 amendments to the Law on Infant Care loosened standards
on setting up day-care centers, such as by moving from a licensing system to a
declaration system.
With respect to spending on welfare for families with children, South
Korea spent 0.8 percent of their budget for an average of 219.0 dollars spent
per family in 2009 while the OECD average was 817.1 dollars per family. If
we look at changes in budgetary spending on children’s policies (excluding
day-care centers), we see that 69.5 billion won were spent in 2007, 208.4
billion won were spent in 2012, and 2,598.2 billion won were spent in 2013.
This clearly shows an upward trend. The children’s allowance increased bymore than 8-fold in one year by going from 102.6 billion won in 2012 to 881.0
billion won in 2013. As indicated in the following table (Table 3-6), thechildren’s allowance is less for children not attending a day-care center orkindergarten than for children attending a day-care center or kindergarten. The
older the child, the lower the amount of the children’s allowance.
Table 3-6. Children’s allowance (monthly amount)(Unit: won)0 years ofage

1 year ofage

2 years ofage

3-5 yearsof ageWhere day-care center/kindergarten is used

347,000

286,000

286,000

220,000

Where neither day-care center nor kindergarten is used

200,000

150,000

100,000

100,000

Produced by the author.

Amendments passed in December 2009 stipulated that priority foradmission to state and public facilities would be given to families with 3 ormore children and children belonging to multicultural families (where one ofthe parents is a non-Korean).
68

Policies have been instituted to allow parents to accommodate both workand child-rearing needs. Some of these policies have resulted in theestablishment of a system of childcare leaves and fixed rate compensation, areduction in working hours, the granting of a spousal childbirth leave by
employers, the establishment of babysitting classrooms in primary schools, andthe establishment of an after-school babysitting service by primary schools.
As a measure for dealing with the low birthrate, the Basic Law for a LowBirthrate Aging Society has been in effect since 2005. In fiscal year 2012, thesupplementation of existing policies was announced as follows. The firstpolicy consisted of a proposal to provide an after-school babysitting service
free-of-charge for primary school students. The second policy consisted of a
proposal for improved working hours to accommodate pregnancies and childrearing requirements and the introduction of shorter working hours and childrearing leaves for spouses. Amendments to 3 laws on maternal protections in2001 (Law on Labor Standards, Law on Employment Equality for Women, and
Law on Employment Insurance) transformed the childbirth leave scheme andchild-rearing leave scheme from schemes that did not provide pay into schemesthat provided or did not provide pay. Specifically, paid leaves became 60 daysin length while unpaid leaves became 30 days in length within the context ofthe childbirth leave scheme and child-care leaves went from being unpaid topartly paid. In order to encourage men to participate in child-rearing tasks, aspousal childbirth leave scheme was adopted in 2007. Under this scheme, an
unpaid leave extended for three days. Revisions undertaken in 2012 caused theunpaid leave to become two days in duration while a paid leave could last forthree days. The third policy consisted of a proposal for guaranteeing rights
corresponding to a woman’s pregnancy and childbirth and included thelowering of medical costs as a way to promote the health of pregnant womenand newborns.
The Special Law on Child Abuse was approved by the National Assemblyin December 2013. Cases of child abuse had been on the rise every year. In
2012, there were 10,943 child-abuse consultations submitted to childprotection agencies (47 locations) across the country. Suspected cases of childabuse accounted for 8,979 of these consultations. Cases involving protection
accounted for 6,050 of these consultations. There were 10 reported cases ofdeath resulting from abuse. Early detection and the fortification of education
are among the measures needed to prevent child abuse.
3. Current state of healthcare security
Public healthcare insurance is characterized by mandatory enrolment foreveryone and by the obligation placed on everyone to pay insurance premiums.
By presenting an insurance card at the reception desk of any healthcare
Chapter 3: South Korea 69

institution, a person can receive healthcare services with the out-of-pocket
payment of a certain percentage of costs incurred. This framework reduces theout-of-pocket amounts to be paid for healthcare services and secures an equal
opportunity to access healthcare by way of the spreading of risks across society
as a whole.
Process by which healthcare insurance schemes evolved
The national healthcare insurance scheme was enacted as a voluntary
insurance scheme in December 1963 but its implementation was delayed due toless-than-ideal domestic socioeconomic conditions. Amendments to the Law
on Healthcare Insurance in 1976 gave rise to implementation in 1977 in theform of the Law on Workplace Healthcare Insurance, which applied tobusiness locations with 500 or more employees. Rising national income andother factors led to the expansion of the scope of this law in 1981, such thatbusiness locations with at least 100 employees became subject to its provisions.
In 1988, this scheme was implemented for the local residents of agriculturaland fishing villages. In 1989, the expansion of coverage to include selfemployed persons in urban areas resulted in universal national insurance.
Against the backdrop of these developments, a presidential election was held in
1987 and the implementation of this scheme was seen as a necessary means forachieving political objectives.
Local healthcare insurance was instituted in the 1990s to address a number
of issues, including differences in economic strength among different
healthcare insurance associations, the weight of the burden of insurance
premiums placed on the residents of agricultural and fishing villages,
dissatisfaction with restrictions on the scope of services, and increases in statesubsidies. In 1996, presidential hopeful Kim Dae-jung (National Assembly)
pledged that he would, as president, “consolidate healthcare, eliminate state
support for healthcare insurance, and direct state support to the development ofeducation and the fields of science and technology.” The subsequentadministration of Kim Dae-jung, who won the election, submitted a bill for a
consolidated national health insurance scheme to the National Assembly in
1998. This bill passed an extraordinary session of the National Assembly in
February 1999 and healthcare insurance in South Korea underwent
consolidation in July 2000. However, the financial administration of healthcare
insurance was consolidated in July 2003 due to difficulties encountered indeveloping a shared system for levying insurance premiums applicable toeveryone, a prerequisite for the consolidation of financial administration. This
process resulted in the continued maintenance of a dualistic insurance
premium-levying system based on job categories and regions for wage earners
and non-wage earners. Focus is being directed to the question of how fairness
among job categories and regions can be ensured through this dualistic
insurance premium-levying system.
70

Table 3-7. Outline of the healthcare insurance scheme
December 1963:
July 1977:

History ofthehealthcare
insurance
schemeOrganizati
ons

Funding

Law on Healthcare Insurance enacted.
Coverage extended to places of business with 50 or more workers (486associations).
January 1979: Public-sector workers and private school teachers obtain coverage by healthcare
insurance.
January 1981: Coverage extended to places of business with 100 or more workers.
January 1988: Area-based healthcare insurance for agricultural and fishing villages implemented.
July 1988: Coverage extended to places of business with five or more workers.
July 1989: Coverage extended to self-employed persons in urban areas to herald theestablishment of universal healthcare insurance.
November 1998: Consolidation of local healthcare insurance associations (227 associations) with agovernment corporation providing healthcare insurance to public-sector workers
and private-school educators takes place.
February 1999: Law on National Health Insurance enacted.
July 2000: Consolidation of a government corporation on healthcare insurance with local
healthcare insurance associations (139 associations) takes place.
The National Health Insurance Corporation becomes the insurer for this scheme.
July 2001: Workplace enrolment of places of business with fewer than 5 workers undertaken.
July 2003: Consolidation of workplace financial administration with area financial
administration (real consolidation) takes place.
July 2004: Limits on copayment amounts introduced.
July 2006: Foreign nationals subject to mandate to enroll in healthcare insurance scheme;
benefits extended to cover meal costs for admitted patients.
2011: Collection of insurance premiums for various social security schemes (national
healthcare insurance, national pension, employment insurance, labor accident
insurance) undergoes consolidation.
Ministry of Health andDetermines policies concerning the health insurance scheme,
Welfaredetermines standards applicable to insurance premiums and additions
to insurance premiums, approves the budget and regulations of the
Insurance Corporation.
National Health Insurance
Collects and adds to insurance premiums, pays benefit expenses,
Corporation
determines drugs prices in collaboration with pharmaceuticalcompanies, and more.
Health Insurance Review and Reviews benefit expenses, evaluates benefit expenses, and more.
Assessment Service
Health Insurance Policy
Reviews and determines benefit standards, benefit expenses,
Review Committee
insurance premiums, and other elements of health insurance;
operates under the jurisdiction of the Minister of Health and Welfare;consists of 25 members, including the Committee Chairperson.
Insurance
Workplace 4.21 percent of standard compensation divided evenly between thepremiums
enrolleeenrollee and the employer
Area
Annual household income of less than 5 million won: grade 30 (sexenrolleeand age + assets + automobile + taxable income) * 172.7 won
Annual household income of 5 million won or more: grade 70 (income+ assets + automobile) * 172.7 won
State funding
35/100 of operating costs of the health-insurance program for thearea enrollee.
National Health Insurance
15/100 of the area insurance benefit expenses. Used for insurance
Promotion Fundbenefits for workplace enrollees, dependents, and area enrollees whoare 65 years of age or older.

Source: Produced by the author based on materials provided by the National Health Insurance Service(http://www.nhis.or.kr/portal/site/main/MENU_WBDAB00 (2013.6.24)) and Agendanet(http://www.agendanet.co.kr/zb41pl7/bbs/view.php?id=soc_sub3&no=43 (2014.4.3)).

Chapter 3: South Korea 71

Healthcare insurers and insured persons
The Minister of Health and Welfare oversees and has final responsibility
over health insurance. The insurer is the National Health Insurance Corporation,
whose operations include managing and maintaining records on insured
persons, collecting insurance premiums, paying insurance benefits, operating
healthcare facilities, providing education and training on health insurance, andissuing press releases.
The Health Insurance Review and Assessment Service is an institution that
operates at arms’ length from the National Health Insurance Corporation. Its
operations include screening insurance benefit expenses, evaluating theappropriateness of insurance benefits, developing screening standards andevaluation standards, engaging in investigative research, and participating ininternational cooperative initiatives.
Insured persons include 1) workplace enrollees (workplace workers, public
sector workers, and educators) and 2) area enrollees (residents ofagricultural/fishing villages and self-employed persons). Enrollment iscompulsory. The dependent of a workplace enrollee is a person living with andon the earnings of the insured person. In other words, dependents comprise thespouse, non-income earning children under the age of 19 years, lineal
ascendants (parents and grandparents of the insured person and the insured
person’s spouse), lineal descendants (current children and grandchildren of theinsured person and the insured person’s spouse), and siblings (not generating
any income). While a foreign national residing in South Korea for at least 3
months and his or her dependents will be subject to enrollment, dependents
shall consist of the spouse and unmarried children under the age of 20 years.
Composition of the financing of healthcare insurance(1) Composition of the financing of insurance, premium rates, and calculating
premium rates
The national health insurance scheme is financed by insurance premiums(taxes), state funding (subsidies), copayments by insured persons, and otherelements. A majority of funding is provided by insurance premiums. Statefunding is equal to 14 percent of the projected revenues from insurance
premiums for a given fiscal year. The financing of healthcare insurance in 2011
can be broken down as follows: insurance premiums accounted for 44.7
percent, amounts paid by insured persons accounted for 32.4 percent, statesubsidies accounted for 13.5 percent, and private-sector insurance accounted
for 5.2 percent.

72

Table 3-8. Changes in healthcare insurance benefits provided toinsured persons
1997• Age of eligibility for receiving a marrow transplant allowance raised (from 40 years to 50 years)

2001• Visiting nursing services to be implemented in 2004

2004

• Implemented maximum copayment amount for examinations (amounts greater than maximum
3 million won over a 6-month period shall be reimbursed)

2005• MRI benefits / Copayment rate for natural births waived / Copayment rate for outpatient
treatments of psychiatric conditions reduced (from between 30 percent and 50 percent to 20
percent) / Premature infant benefit (copayment waived) / Benefit period for therapeutic agent
for osteoporosis extended (90 days to 180 days) / Copayment rate for cancer and otherconditions reduced (20 percent to 10 percent)2006• Copayment for the admission of patients under 6 years of age waived / Organ transplant
surgery benefits (heart disease, heart, lungs, pancreas) / Copayment for specific cancer
examinations reduced (stomach cancer, breast cancer, colon cancer, liver cancer: 50 percent to20 percent; cervical cancer: waived)

2006• PET scans for serious diseases (heart, organ disease) become covered by health insurance /Application of a meal allowance switch carried out (20 percent copayment rate) / Childbirth
benefit expenses at institutions other than a medical treatment institution increased (70,000
won to 250,000 won)

2007

• Copayment requirement for outpatient examinations of children under the age of 6 years
lessened and changes to the system for having the insured person pay for himself/herself made/ Lowered the maximum amount to be assumed by the insured person (3 million won to 2
million won over six months)

2008• Amount to be assumed by the insured person upon being admitted to the hospital for a childunder the age of six years raised from 0 percent to 10 percent (amount to be assumed by the
insured person waived for newborns) / Percentage of meal costs for and assumed by admitted
patients raised from 20 percent to 50 percent / Benefits to cover funeral expenses eliminated(Article 25 of the current statute) / Examination voucher system for women during pregnancy
introduced and put into force (200,000 won support)

2009• Maximum copayment rates according to income implemented / Copayment rate for treatmentof patients with intractable diseases (138 types) on an admitted or outpatient basis reduced (20percent to 10 percent) / Copayment rate for outpatient treatments at specialized general
hospitals raised (50 to 60 percent) / Coverage extended to physical treatments at hospitals
providing traditional Chinese medicine / Copayment rate for treatment of cancer patients on an
admitted or outpatient basis reduced (10 percent to 5 percent)2010• Copayment rate for heart disease and cerebrovascular disease reduced (10 percent to 5
percent) / Copayment rate for tuberculosis reduced (10 percent) / Support funds to cover
medical treatment costs of pregnancy and childbirth increased (200,000 won to 300,000 won) /MRI insurance coverage expanded (spine and joints) / Anti-cancer drug benefits introduced /Drugs for the treatment of intractable diseases introduced

2011• Benefits for the coverage of pregnancy and childbirth examination costs increased (300,000
won to 400,000 won) / Coverage of radiation treatments for childhood cancers introduced /Coverage of radiation operations for lung cancer and backbone tumors introduced

Produced by the author.

Healthcare insurance comprises workplace enrollees and area enrollees.
With respect to the standards for calculating healthcare insurance premiums,
Chapter 3: South Korea 73

premiums are evenly split between the worker and the employer for workplace
enrollees and evenly split between the state and the insured person for publicsector workers. For educators at private institutions, the framework is such thatthe teacher will pay 50 percent, the educational institution will pay 30 percent,and the state or local government will pay 20 percent.
With respect to the standards for calculating insurance premiums, thepremium is equal to the number of standard compensation months multipliedby the insurance premium rate for a 1) workplace enrollee. The average
insurance premium rate for the portion of premiums paid by an insured person
was as follows: 3.57 percent in 1986, 3.03 percent in 1995, 3.13 percent in
1997, 3.27 percent in 1998, and 3.75 percent in 1999. Insurance premiums forworkplace enrollees and public-sectors workers/teachers at private educational
institutions were consolidated and set to 3.4 percent in 2001. They wereincreased slightly to 5.64 percent in 2011 and 5.89 percent in 2013.
The insurance premium for a 2) area enrollee is equal to the standard
assessed income score (score tallied by household unit) multiplied by a fixedamount. The standard assessed income score is certified each year for eachhousehold by the insurer by taking into account the asset situation for eachhousehold (including vehicle ownership). The household income score isdifferentiated between annual income of 5 million won or more and annual
income of less than 5 million won and the scope of insurance premiums
corresponds to 70 grades for annual income of 5 million won or more and to 30
grades for annual income of less than 5 million won.
(2) Changes in copayments to be paid by insured persons and in types of
insurance benefits
While healthcare benefits are obtained by presenting a card tied to theinsured person to a hospital or medical care center constituting a healthcare
insurance institution, the portion of costs to be paid on an out-of-pocket basis
will need to be paid to the given healthcare institution. The copayment amountis a uniform 20 percent nationwide for admission costs but differs according totype of hospital and region for copayments made for outpatient procedures.
The bigger the hospital and the bigger the city, the higher the copayment
amount. In other words, the copayment amount to be assumed is 60 percent at
top-tier general hospitals, 50 percent at neighborhood general hospitals (45percent in other areas), 40 percent at neighborhood regular hospitals (35percent in other areas), and 30 percent at all medical clinics and healthcare
centers. The copayment amount for pharmaceutical drugs is a uniform 30
percent nationwide.
In other words, the healthcare insurance scheme is fundamentally
characterized by low burdens in terms of insurance premiums and low benefits
in terms of services provided. 1) The imposition of relatively high copayment
amounts for medical care covered by insurance on a patient and 2) the74

provision of blended medical care not covered by insurance services are
permitted. Blended medical care is an approach to providing medical care thatcombines a medical treatment covered by health insurance with a medical
treatment not covered by health insurance. For this reason, the rate ofenrolment by persons in private insurance plans is exceptionally high.
According to the OECD (2007), private medical costs accounted for 47.4
percent of national medical costs in 2004, far exceeding the 18.3 percent figure
corresponding to Japan.
In recent years, the types of insurance benefits offered to insured persons
have been gradually expanding. Notably, copayments for children under 6
years of age were eliminated in 2006, copayment requirements for 138 types of
intractable conditions were lightened in 2009, and radiation treatments forpediatric cancers became eligible for benefits in 2011.
(3) Current state of the health insurance program (state of insured persons andinsurance finances)
As indicated in Table 3-9, the number of insured persons reached 48.90
million in 2010, an increase of approximately 3 million in a decade. The
number of dependents of workplace enrollees also increased to 19.86 million in
2011. The increase in the number of dependents of workplace enrollees is tied
to the fact that low income-earning cohabiting and non-cohabiting parents,
parents-in-law, and siblings have also become dependents in addition to
spouses. In 2011, the ratio of workplace enrollees to area enrollees was 67.5 to
32.5, such that workplace enrolled insured persons are accounting for an
increasing percentage of enrollees. This is in part the result of having area
enrollees at places of business with less than 5 employees become treated as
workplace enrollees.
Table 3-9. Numbers of insured persons and dependents covered byhealth insurance
Fiscal year

2000

2005

2010

2011

45,895,749

47,392,052

48,906,795

49,299,165

Workplace insured
persons

22,403,872

27,233,298

32,383,526

33,256,574

Total number

Dependents

15,135,900

17,487,701

19,619,797

19,859,861

Local insured persons

23,491,877

20,158,754

16,523,269

16,042,591

Households

8,215,282

8,384,173

7,940,227

7,887,563

Persons entitled to receive
healthcare benefits

1,570,009

1,761,565

1,674,396

1,609,481

Workplace insured persons:local insured persons

48.5:51.2

57.5:42.5

66.2:33.8

67.5:32.5

Source: 2011 Annual Statistical Report on National Health Insurance as issued by the National Health Insurance
Corporation in 2012.

Chapter 3: South Korea 75

With respect to the financing of healthcare insurance, insurance premiumsrose by a factor of 9 over a 16-year period to 329.2 billion won in 2011. Per
capita insurance premiums also increased to 404,000 won in 2011. Statefunding also rose to 50.3 billion won in 2011. Insurance benefit expenses
increased to 358.33 billion won in 2011. Per capita insurance benefit expenses
also went up to 729,000 won in 2011 (Table 3-10). In other words, insurance
premiums and insurance benefit expenses have both climbed higher but
insurance premiums have been rising at a greater rate than the increase ininsurance benefit expenses. This increase in insurance benefit expenses can be
attributed to a number of factors, including 1) an expansion in the types of
insurance benefits, 2) a sustained increase in the number of insured persons’dependents, and 3) a high rate of the utilization of healthcare institutions aselderly persons live longer lives on average.
At the same time, healthcare benefit expenses in South Korea as apercentage of GDP rose from 3.8 percent in 1995 to 6.9 percent in 2009
(compared to an average 9.6 percent in OECD countries). The country ranks
thirty-fifth among all (41) OECD countries.
Table 3-10. Changes in insurance premiums and insurance benefit expenses(1995-2011)
1995
Insurance premiums (1 million won)State subsidies (1 million won)

3,600,700
755,319

2000

2002

2004

2005

7,228,817 10,927,688 15,614,223 16,927,714
1,552,746

3,103,934

3,482,965

3,694,802

Total amount(insurance premiums + state subsidies)

4,356,019

8,781,563 13,941,622 19,097,188 20,622,516

Insurance benefit expenses (1 million won)

4,067,617

9,285,605 13,823,665 16,265,350 18,393,587

Per capita insurance amount per year (won)

56,340112,428

161,100

215,820

229,248

Per capita insurance benefit expenses (won)

93,077202,144297,261

344,151

388,017

2006

2007

2009

2010

2011

Insurance premiums (1 million won)

18,810,579 21,728,700 26,166,081 28,457,726 32,922,110

State subsidies (1 million won)

3,836,190

Total amount(insurance premiums + state subsidies)

22,646,769 25,400,494 30,848,912 33,319,173 37,958,308

Insurance benefit expenses (1 million won)

21,587,980 24,560,092 30,040,871 33,749,303 35,830,249

3,671,794

4,682,831

4,861,447

5,036,198

Per capita insurance amount per year (won)

250,212284,277

331,441

357,185

404,039

Per capita insurance benefit expenses (won)

455,360

515,096

620,467

692,159

729,262

Source: National Health Insurance Statistics as released each year by the National Health Insurance Corporation.

76

Table 3-11. Changes in the per capita average number of days of healthcare
institution usage and number of days of pharmacy usage
2000

2002

2003

2005

2007

2009

2010

2011

Healthcare institution

11.63

13.94

14.68

15.32

16.58

17.98

18.57

18.82

Admitted

0.88

0.97

1.09

1.9

1.57

1.91

2.12

2.21

Outpatient

10.76

12.97

13.58

14.13

15.01

16.07

16.44

16.62

3.76

8.32

8.10

8.43

8.83

9.41

9.54

9.64

Pharmacy

Source: National Health Insurance Statistics as released each year by the National Health Insurance Corporation.

In terms of the average number of days healthcare institutions are used, thenumber of days of admission per person stood at 2.21 in 2011 and the numberof days of outpatient care equaled 16.62 in 2011. The per capita number ofdays pharmacies were used in 2011 also rose to 9.64. The number of days ofoutpatient care ranked highest in terms of the per capita number of days
healthcare institutions are used, followed by the number of days of pharmacy
usage and the number of days of admission. That the number of days ofpharmacy usage was less than the number of days of outpatient care is tied to
the fact that there are many people using pharmacies by assuming costs fullyon an out-of-pocket basis (Table 3-11).
The number of healthcare institutions rose from 53,510 in 1995 to 82,983
in 2011. By type of healthcare institution, the rate of increase in the number ofhospitals ranked highest, followed by medical clinics, hospitals wheretraditional Chinese medicine is practiced, and dental clinics. In contrast,
maternity centers are on the decline (Table 3-12).

Clinics

Dental hospitals

Healthorganization

Maternity
centers

Pharmacies

460

14,472

14

8,327

69

5,716

3,588

183

20,415245

681

19,68860

10,592

141

7,243

3,427

126

19,5302005 72,921

42

249

1,112

25,166124

12,548

149

9,761

3,422

52

20,2962010 81,681

44

274

2,182

27,469191

14,681

168

12,0613,469

4621,0962011 82,983

44

275

2,369

27,851

199

15,059184

12,4053,468

40

21,089Hospitals basedon traditional
Chinesemedicine
Clinics based on
traditional
Chinesemedicine

Hospitals

227

43

Dental clinics

General hospitals

39

2000 61,776

Total

1995 53,510

Fiscal year

High-grade
general hospitals

Table 3-12. Changes in the number of healthcare facilities by type of
healthcare facility (hospital, clinic)

Source: National Health Insurance Statistics as released each year by the National Health Insurance Corporation.

Chapter 3: South Korea 77

4. Current state of pension security
The national pension scheme aims to contribute to the stabilization of
livelihoods and the promotion of national welfare by providing pension
benefits in case of old age, disability, or death to insured persons (Article 1 of
the National Pension Law).
Types of public pensions, process of evolution, insured persons andinsurance premiums, and qualifications for receiving benefits
Public pension insurance schemes in South Korea include the national
pension scheme and special occupational pension schemes, which in turninclude pensions for public-sector workers, pensions for military personnel,
and pensions for private school educators. Indexation has been adopted for thenational pension scheme, which is a modified funded system that neverthelessresembles a pay-as-you-go system. Special occupational pension schemes are
based on a pay-as-you-go system. A funded system is one that accumulates theexpenses required for future pension benefits during the period of enrolment of
the enrolled person with benefits to be obtained in the future. One advantage isthat complications between elderly persons and younger generations are lesslikely to arise. The fact that it is difficult to accommodate inflation and the factthat the system is susceptible to interest rate fluctuations are disadvantageous
points. A pay-as-you-go system is a system whereby the generation stillworking pays insurance premiums for pension recipients and pension benefit
expenses are covered by contributions made by enrolled persons belonging to
the generation still working. A shortcoming of this system is the ease withwhich complications between the generation still working and pension
recipients can arise. On the other hand, this system is advantageous for making
it possible to maintain the value of pension amounts despite inflation.
As for special occupational pension schemes, a pension for public-sector
workers set up in 1960 was the first public pension in the country. A pension
for military personnel was established in 1963 and a pension for private school
educators was established in 1975. While the national pension scheme wasenacted in 1973, it was finally put into effect in 1988 after undergoing
modifications in 1986.
This delay in the implementation of a public pension scheme was tied to 1)
the pursuit of economic and developmental streamlining through theminimization of the burden of providing social security placed on the state inaccordance with a policy of “economic growth before distribution” and 2) the
persistence of the traditional belief that children are required to financially
support their elders.
While places of business with 10 or more workers were subject to the78national pension scheme in 1988, this scheme was expanded to encompass
places of business with five or more workers in 1992, to the residents ofagricultural and fishing villages in 1995, and to self-employed persons in urban
areas in 1999 to ultimately bring about a universal national pension scheme.
Insured persons under the national pension scheme consist of Korean
residents between the ages of 18 years and under 60 years. This scheme covers
workers at places of business, self-employed persons, and unemployed persons
but not persons enrolled in a special occupational pension scheme, persons
receiving a subsistence guarantee, and persons receiving a disability pension.
Insured persons under a special occupational pension scheme can be broken
down as follows: military personnel receive a pension for military personnel,
public-sector workers receive a pension for public-sector workers (including
national-level school educators and postal workers in special services), andprivate-school educators receive a pension for private-school educators. The
dependents of insured persons consist of spouses (in other words, homemaking
wives), children (under the age of 18 years or children with a grade 2 disability
or higher), and parents (age 60 years or older or parents with a grade 2
disability or higher). If a dependent is a recipient of a national pension,
however, he or she will be excluded from the scope of dependents for thispurpose.
Insurance premiums for company employees are equal to 9 percent ofcompensation and their payment is evenly divided between the insured person
and the employer. National pension insurance premiums were set at 3 percent
up until June 2000. This rate was increased by 1 percentage point eachsubsequent year and then set to 9 percent in August 2005. Insurance premiums
are fully paid by the insured person and differ according to income. Insurance
premiums for the residents of agricultural and fishing villages are covered by
the insured person and the state. The amount paid by the state went up in 2012
from one-third to one-half of the minimum amount of compensation. For theenrollees of a special occupational insurance scheme, insurance premiums
equal 17 percent of the compensation paid to a public-sector worker or military
personnel service member and their payment is evenly divided between theinsured person and the state. For a private-school educator, 8.5 percent of
insurance premiums are paid by the insured person, 5 percent are paid by theemployer, and 3.5 percent are paid by the state. Insurance premiums for staff
members at a private school are equal to 17 percent of compensation and their
payment is evenly divided between the insured person and the employer.
The eligibility to receive a public pension differs depending on whether thepension is a national pension or a special occupational pension. For thenational pension, at least 10 years of insurance premium payments are required
and the full amount of the pension will be paid to persons who have paid
Chapter 3: South Korea 79

insurance premiums for at least 20 years. The actual amount of benefits paid
will differ according to the number of years that insurance premiums were paid
and the amounts of the insurance premiums that were paid. At least 20 years of
insurance premium payments will be necessary to receive a special
occupational pension for public-sector workers or private-school educators.
Table 3-13. Outline of public-pension schemes
Category
Insurance premium(fiscal year of Insured persons
rateintroduction)

Start of thereceipt ofbenefits

Incomereplacement
rate

National
pension(1988)

1988: places ofbusiness with
10 or moreworkers; 1995:
residents ofagricultural andfishing villages;
1999: selfemployedpersons inurban areas

9 percent(occupational: split
evenly between
employer andemployee; area:
fully paid by the
insured person;
agricultural andfishing villages:
state pays half ofminimum
compensation)

20 years (10or moreyears ofpayments)

50 percent in
2008
 40
Modified
percent infunded2028
system(40 years of
payments)

Pension for
public-sector
workers(1960)

Public-sector
workers, postal
workers inspecial services,
national school
educators

17 percent (split
evenly between
20 yearsinsured person andthe state)

76 percent(33 years of
payments)

PensionService forPay-as-youPublicgo system
Sector
Employees

Military
personnel

17 percent (split
evenly between
20 yearsinsured person andthe state)

50 percent(20 years of
payments)
76 percent(33 years of
payments)

Ministry
Pay-as-you- ofgo system
National
DefensePrivate-school
educators andstaff members

17 percent(educator: 8.5
percent byeducator, 5 percent
by juridical person,and 3.5 percent by
20 years
the state; staff
member: split
evenly between
the insured person
and the juridical
person)76 percent(33 years of
payments)

PensionService forPay-as-youPrivatego system
School
Educators

Pension for
military
personnel(1963)

Privateschool
pensions(1975)

Produced by the author.

80

FinancingapproachFundmanagementNational
PensionServicePersons born in 1969 can begin to receive a pension at the age of 65 years,
those born between 1965 and 1968 can begin to receive a pension at the age of
64 years, and those born between 1953 and 1956 can begin to receive a pension
at the age of 61 years. While a payer of premiums for over 20 years could
previously begin to receive a special occupational pension upon retiring, theage at which a newly hired person can begin to receive a pension was set to 60
years in 1996.
The amount of the national pension that can be received was 70 percent ofcompensation in 1998 and 60 percent of compensation between 1999 and 2007,
is 50 percent of compensation for the years between 2008 and 2027, and isslated to be reduced to 40% of compensation from 2028 onwards. The amountof special occupational pension benefits receivable by a public-sector worker
or a private-school educator is 76 percent of compensation for a person who
has paid insurance premiums for 33 years and by military personnel is 50
percent of compensation for a person who has paid 20 years of insurance
premiums. For any public pension, the higher the income, the higher thepension amount. For a low-income person, however, the lower the income, thegreater is the magnitude by which the amount of pension benefits exceeds theamount of insurance premiums paid. This is clear when one takes into accountthe income-redistribution effect.
With a conjugal pension division system having been adopted for thenational pension scheme, the portion of pensions to which an insured person
becomes entitled during the marriage is to be divided and granted to the exwife in case of a divorce (Table 3-13).
Current state of public pension revenues and benefits
The public pension fund consisted of 391,968 billion won in 2012, at whichtime the amount of benefits had risen to 82,528 billion won. National pension
benefit expenses accounted for an exceedingly low 0.91 percent of GDP in
2012.
While there were 20 million persons enrolled in the national pension
scheme in 2012 (88 percent), payers account for 61 percent of enrollees, whichmeans that 4 out of 10 enrollees do not pay any insurance premiums. The
payment rate among area enrollees is 67 percent, which means that 3.3 out of
10 enrollees do not pay any insurance premiums. The rate of non-payers
among area enrollees is due to a lack of confidence in the future of pensions
and a high degree of distrust in the pension system, a situation that has beencultivated in part from seeing newspapers, television programming, andmagazines putting forth such headlines as “Pension collapse,” “Your pension
at risk,” and “No pension after retirement.” Although stories of pension
insecurity being told by mass-media outlets and magazines in Japan can be
Chapter 3: South Korea 81

applied directly to the situation in South Korea, one should be aware that the
fiscal years in which pensions first began to be paid out differ between Japanand South Korea. Next, it is more accurate to say that self-employed persons,non-permanent jobholders, and unemployed persons are unable to pay
insurance premiums due to the high burden of paying insurance premiums
rather than to say that they simply do not pay insurance premiums. Finally,national pension benefits began to be paid out in 2008, such that the people areoften lacking in correct knowledge or information about the pension scheme.
Thus, education to enable people to obtain accurate pension knowledge isneeded.
The recipients of public-sector workers’ pension benefits accounted for 33
percent of public pension enrollees in 2012, the highest such figure for thiscategory, followed by 17 percent for the national pension scheme and 14
percent for the private-school mutual-aid pension scheme. The recipients of apublic-sector workers’ pension and the recipients of a national pension are on
the rise both in terms of numbers of persons and percentage of public pension
enrollees (Table 3-14).
The average amount of old age pension benefits provided to enrollees who
have paid insurance premiums for the national pension scheme for 20 years
was approximately 820,000 won in 2012. With respect to the amounts of
insurance payments received by dependents, spouses receive 240,000 won ayear while children and parents receive 160,000 won a year per person.
Other pensions(1) Basic old-age pension schemea) Persons entitled to receive benefits: Persons who are suffering from
economic hardships and who are 70 years of age or older are entitled to receive
benefits. An old-age allowance has been paid since 1991. In 1999, a national
basic subsistence guarantee scheme was implemented to guarantee a minimum
livelihood for everyone. A national basic old-age pension scheme wasestablished in 2008 for which recipients of benefits are required to undergo ameans test. This scheme was introduced to provide economic relief to lowincome elderly persons who are not entitled to receive a national pension
despite the establishment of a national pension scheme in 1988.
As indicated in Table 3-15, there were approximately 2.9 million recipientsof the basic old-age pension in 2008, a figure that rose to approximately 3.93
million in 2012. Recipients of the basic old-age pension accounted for 57.2
percent of the total elderly population in 2008. This figure rose to 68.9 percent
in 2009 and stood at 65.8 percent in 2012.

82

Chapter 3: South Korea 83

16,72820,246

21,542

22,832

23,82924,682

Year

1988

1999

2001

2005

2010

2012

21,705

20,54818,347

17,407

17,383

5,341

Publicpensionenrollees
(B)

87.9

86.2

80.4

80.8

85.9

31.9

B/A (%)

20,32919,22917,124

16,27816,262

4,433

Enrollees

61.4

57.1

52.6

52.5

17.3

15.5

10.3

5.9

7.7

0.1

Payments/ Benefits/
enrollment enrollment

National pension

1,064

1,052

986

913

914

767

Enrollees

32.8

29.6

22.1

17.6

14.1

2.4

Benefits/
enrollment

Public-sector workers’
pension

312

267

237

216

208

141

Enrollees

13.5

14.0

9.4

6.8

5.1

0.6

Benefits/
enrollment

Private-school pension

80,26275,67764,55757,38053,534

Persons
receiving
benefits

2,545,008

2,206,821

1,665,777

1,193,247

1,001,707

IncomePension for military
personnel

0.91

0.74

0.41

0.24

Amount ofsocialbenefits/
GDP

3,630,147
3,727,940
3,818,186
3,933,095

2009
2010
2011
2012

65.8

67.0

67.7

68.9

57.2

26.0

24.0

22.1

19.8

13.9

B/population of elderly
National pension/B (%)
persons (%)

Source: 2012Material for National Pension Service 2012 (National Pension Service

2,897,649

2008

Basic old-age pension(B)

Table 3-15. Changes in basic old-age pension recipients

Source: Produced by the author based on the 2012 National Pension Annual Statistical Report (National Pension Service) and the 2012 Key Statistical Diagrams Corresponding to the Pension for
Military Personnel (Ministry of National Defense).

Note: The amount of the pension for military personnel that was received in 2012 amounted to 2,473,556 million won; 6,259 persons received less than 1.10 million won, 32,994 persons received
less than 2.00 million won, 33,171 persons received less than 3.20 million won, and 7,667 persons received 3.20 million won or more.

Employed
persons
aged 18
years orolder (A)

(Units: thousands of persons, %, 1 million won)

Table 3-14. Persons enrolled in public-pension schemes, benefit rates, and benefit amounts as a percentage of GDP

Since the current approach, which involves making collective payments of
7 types of basic subsistence guarantee benefits, will be transformed into an
approach consisting of making individual payments from October 2014, it isexpected that the number of persons entitled to basic subsistence guarantee
benefits will increase from 830,000 households to 1,000,000 households.
b) The amount and financing of basic old-age pension benefits to be paid:
The amount of the basic old-age pension was 78,000 won per month for elderly
persons living alone and 124,000 won for households comprising just ahusband-and-wife couple in 2012. The income replacement rate for the basic
old age pension was 5 percent in 2008 but is projected to become 10 percent in
2028.
Financing of the basic old-age pension is provided by the state and local
governments with the state assuming 40 to 90 percent of costs and each local
government making contributions by taking into account the percentage of thelocal population comprising elderly persons and local fiscal conditions.
(2) Basic pension
The basic pension is a pension scheme that was implemented as apresidential election pledge for the administration of Park Geun-hye and began
to be paid out in July 2014. A person who is entitled to receive this pension isan elderly person aged 65 years or older who receives a national pension ofless than 300,000 won per month and whose income and assets add up to lessthan 870,000 won per month if he or she lives alone or less than 1,392,000 won
a month if he or she is part of a household comprising only a husband and wife.
While the amount of the basic pension is 200,000 won per month, this amount
can be reduced according to the sum of income and assets. In July 2014,
4,060,000 people received approximately 200,000 won and 410,000 people
received less than 200,000 won. The amounts received by recipients arecontroversial for being low.
(3) Survivor’s pension
A person entitled to receive a survivor’s pension upon the death of an
insured person enrolled in the national pension scheme is a person living with
the insured person in the same household. The order of priority for receiving asurvivor’s pension is as follows: the spouse of the insured person, a child under
the age of 19 years or a child with a class 2 or higher disability, a parent aged
60 years or older (could be a parent of the spouse) or a parent with a class 2 orhigher disability, a grandchild under the age of 19 years or a disabled
grandchild, and a grandparent aged 60 years or older. However, the age at
which a survivor’s pension can be received is gradually being increased, suchthat an insured person born in 1969 or later will become a recipient at the ageof 65 years.
The amount of the survivor’s pension that can be received differs according84

to the period of enrolment as follows: 1) the lowest amount is for an enrolment
period of less than 10 years (40 percent of the basic pension amount +dependents’ pension amount), 2) less than 20 years of enrolment (50 percent of
the basic pension amount + dependents’ pension amount), 3) 20 or more yearsof enrolment (60 percent of the basic pension amount + dependents’ pension
amount). The average amount of the survivor’s pension that was paid out in2012 was 240,000 won.
5. Future issues concerning social security programs
As the decreasing birthrate and aging of the population in South Korea
progresses rapidly, the number of elderly persons requiring nursing care,including those suffering from dementia, is on the rise. At the same time,family functions are on the wane and families are finding it more and moredifficult to provide economic assistance and nursing care to elderly parents.
While the public pension scheme was launched in 1998 with pensions being
paid out since fiscal year 2008, elderly persons not eligible to receive a pension
account for 40 percent of all elderly persons, such that an approach based on
self-responsibility, including by way of a reliance on family, is typically taken.
In other words, the scheme is structured in a way that emphasizes self-help.
While social security programs have been developed, there is a need toeliminate disparities between the young generation and the elderly generation.
A number of issues stand in the way of efforts to enhance the country’s social
security programs.
Nursing-care insurance scheme
First, the scope of persons covered by nursing-care services needs to be
expanded in order to enhance the financial administration of nursing-careinsurance. While insured persons presently consist of persons enrolled in thenational health insurance scheme, persons covered by nursing-care services are,as a rule, people aged 65 years or older. When nursing-care insurance
premiums rise in the future, the nonpayment of insurance premiums by insured
persons excluded from the scope of coverage for nursing-care services will
become a concern.
Second, there is a need to focus on the quality of nursing-care services. The
establishment of nursing-care business establishments is based on a declaration
system. For this reason, small-scale business establishments are microenterprises that tend to offer poor quality care. Consequently, while there aremany hundreds of persons on waiting lists for admission into district-run
establishments in Seoul, many empty rooms can be found in private-sector
establishments. Efforts to improve the quality of nursing care by small-scale
Chapter 3: South Korea 85

business establishments will enable the service needs of elderly persons
requiring nursing care to be fulfilled and the management of businessestablishments to be maintained.
Third, care management needs to be proactively undertaken. A model careplan is a unilateral notice. For this reason, elderly persons requiring nursing
care and their families tend to ignore model care plans and use services after
concluding a contract with the service provider. As a result, service types tend
to consist of unitary items, such that it is difficult to ameliorate the physicaland mental state of elderly persons requiring nursing care and reduce theburden of nursing care on family caregivers over the long run.
Healthcare-insurance scheme
First, the financing of healthcare insurance needs to be maintained. To thisend, policies to promote the maintenance of the health of elderly persons
should be put into effect and the tendency of healthcare institutions to carry out
unnecessary tests and treatments and other causes of financial deterioration
should be analyzed in an effort to find fundamental solutions. Reforms toenable healthcare costs to be reduced in the long run while maintaining thequality of healthcare—in other words, the systematic management of healthand measures based on the concept of preventive medicine to prevent illnesses
and disorders—are needed.
Second, while differences among insurance associations have disappeared
thanks to the consolidation of healthcare insurance—the remediation ofdifferences in terms of the collection of insurance premiums between
workplace enrollees and area enrollees is required. While insurance premiums
are calculated based on income net of required expenses for self-employedpersons, they are calculated based on salary before taxes for workplace
enrollees.
Third, copayments by service users should be adjusted and the scope of
insurance benefits needs to be expanded. Even among OECD countries, South
Korea imposes very high copayment requirements on the use of healthcare
services by insured persons and the scope of insurance benefits is relatively
narrow. Most South Koreans are currently enrolled in plans offered by private
insurance companies. When these facts are taken into account, it is clear that
South Korea needs to increase state spending as a percentage of GDP, promote
an appropriate approach to collecting insurance premiums from insured
persons, and expand the scope of service benefits.
Pension-security scheme
First, relief measures for elderly persons not receiving a national pension
are required. Due to age restrictions imposed at the time the public pension
86scheme was introduced in 1988, elderly persons not enrolled in the national
pension scheme account for approximately 40 percent of all elderly persons
aged 65 years or older. The amount received by the recipients of a national
pension whose period of receipt is short is exceedingly low. A framework forallowing elderly persons who find it difficult to economically rely on theiradult children to live in the local community should be built.
Second, accurate media reporting on the national pension scheme by
television stations, newspapers, and magazines and proper school education on
this topic are needed to stabilize the financing of pensions for area enrollees
and promote economic security for people in their old age. While persons who
have paid insurance premiums for 20 years have been entitled to receive anational pension since 2008, many self-employed and non-permanently
employed persons do not pay insurance premiums in response to an anxious
belief that receiving a pension in the future will be difficult. Newspapers,
television stations, and magazines tend to report matters by directly applying
the anxiety over the future of pensions as reported in Japan to the situation on
the ground in South Korea without being aware of the differences between
Japan and Korea in terms of the fiscal years in which pensions first began to be
paid out, thereby fostering a sense of distrust over the pension system. If
educational institutions and insurers could thoroughly provide education on theimportance of the national pension scheme, it may be possible to eliminate
anxiety over and distrust in the pension system and thereby lower the extent towhich premiums are not paid.
Third, special occupational pensions correspond to lower premiums andhigher benefits than pensions based on area enrollments, such that remediationfrom the standpoint of fairness between special occupational pensions andpensions based on area enrollments is required. Analytical studies haverevealed that the amount of received benefits under the pension scheme forpublic-sector employees is between 209 and 219 percent higher than theamount of benefits received by 100 or more area enrollees, such that the gap
between occupations is exceptionally large. At the same time, the financial
administration of the public sector workers’ pension scheme and pension
scheme for military personnel is already in the red. Disbursements are expected
to exceed revenues for the mutual-aid pension scheme for private school
educators in 2019. While only reductions in the income replacement rate havebeen indicated under current revisions by candidates playing to the gallery forelection purposes, the amounts received by persons receiving high amounts ofbenefits will need to be corrected.

Chapter 3: South Korea 87

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Social insurance for social security is designed to grant relief to people who haveencountered risks by providing against various life risks, facilitates the payment of
insurance premiums based on the ability to pay in accordance with the level of incomeof the insured person, and is characterized by mandatory enrollment. Public
assistance is economic assistance provided to guarantee a minimum standard of living
to poor people. Public assistance under the Basic Law on Livelihood Protection waschanged to public aid through the amendments of December 1995 and to a “basic
subsistence guarantee” through the enactment of the National Basic Livelihood
Protection Law in September 1999. Social welfare services comprise a support system
to enable everyone requiring state, local government, and private-sector support tolead normal social lives. This is made possible through the provision of counseling,
independent-living assistance, job referrals and guidance, social welfare facilities thatcan be used, and other such services. Related welfare programs include those thatdeal with insurance, housing, education, and employment.

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This book was originally published by Horitsu Bunka Sha in March 2015. With the consent of theauthors and the publisher, OLICD Center translated the book into English in March 2016.