For Relief Payments to Revive Livelihoods, Wise Targeting with Inflation in Mind Is Needed Over Universal Aid

The 20 trillion won supplementary budget bill, set to be submitted to the Cabinet meeting on the 19th of this month, includes the payment of “livelihood recovery support funds,” and policy debate is once again heating up over how they should be distributed. The government is strongly considering a selective and differentiated payment plan based on income level, while the Democratic Party of Korea is holding fast to its presidential campaign pledge of a universal payment of 250,000 won for all citizens. In a situation where limited fiscal capacity, high inflation, and the need for economic stimulus must all be taken into account, what choice should we make?

The government’s proposal would provide differentiated payments of up to 500,000 won, divided into first- and second-round payments according to income level. Specifically, 400,000 won would be paid in the first round to basic livelihood security recipients, 300,000 won to the near-poor and single-parent households, and 150,000 won to the general public. In addition, 100,000 won would be paid to all citizens except the top 10% income earners. Under this structure, payments would range from a minimum of 150,000 won to a maximum of 500,000 won.

The core of this proposal is the efficient execution of public finances. Providing the same amount uniformly even to high-income groups would inevitably invite controversy over fiscal waste, while the actual benefit felt by recipients would also be low. By contrast, concentrating support on lower-income groups produces a relatively larger and more direct consumption-boosting effect among those whose disposable income rises sharply.

Meanwhile, the Democratic Party argues for a “universal 250,000 won payment,” maintaining that all citizens should receive support. Universal support has political appeal in that it is administratively efficient and ensures that no one is left out of the policy’s benefits. In particular, memories of the positive public response to repeated disaster relief payment policies after COVID-19 continue to weigh heavily in politics.

However, the current economic environment is fundamentally different from the COVID-19 period. At that time, nationwide lockdowns, restrictions on activity, and damage to the self-employed occurred broadly and immediately, making rapid universal support an unavoidable response. But now, employment and consumption are showing signs of recovery, and the causes of the economic slowdown are not concentrated in any particular class or industry. Rather, the current phase is closer to one in which income polarization and hardship among specific groups are appearing more selectively.

As of 2025, Korea’s national debt has already exceeded 1,200 trillion won, and this year alone tax revenue is projected to fall short by more than 30 trillion won. Under these circumstances, a blanket universal payment to the entire population could instead produce weaker effects while only draining public finances.

Realistically, the most desirable compromise would be a selective payment method excluding the top 20% income bracket (1.188 million won in average monthly income for the fifth quintile, according to Statistics Korea). Under this approach, support payments would be provided to 80% of the population, with differentiated payments by income level or concentrated support for self-employed people who have suffered sharp income declines. Fiscal costs could be reduced by about 20% or more compared with universal payments, allowing the overall size of the budget to be controlled. This would also help reduce the scale of government bond issuance, which would be positive for securing medium- to long-term fiscal soundness.

Gwang yong Go, Policy Director, Center for Free Enterprise (CFE)

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Original title: 민생회복지원금, 보편보다 물가 고려 '현명한 선별' 필요

Author: Gwang yong Go

Date: 2025-06-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27807