Gyeonggi Province experiments with rural basic income in second half of 2021

Posted on : 2021-03-24 17:22 KST Modified on : 2021-04-14 11:38 KST
An opportunity to test what could be a policy for addressing low efficiency or a remedy for inequality

Is a basic income a solution to inequality? Or is it a policy with serious side effects and little impact to show for the massive financial resources channeled into it? Is there any way of pre-testing a policy measure with influences as far-reaching as those of a basic income? For those asking such questions, a new policy holds important implications: the rural basic income system, which Gyeonggi Province is introducing in the second half of 2021. On March 4, the province gave advance legislative notice for the enactment of a “rural basic income social experiment ordinance.” After hearing views from provincial residents through Wednesday, it plans to announce a final list of rural communities eligible for a basic income, along with the duration and amount of payments.

The rural basic income system that Gyeonggi Province is introducing is a significant step: an examination aimed at pre-testing the effects of a particular policy before it is expanded nationwide. No government to date has implemented a full-scale basic income at the state level. The US state of Alaska, which has made cash payments in the form of “Permanent Fund Dividends” (PFDs) since 1982 to people who have resided there for at least one year, represents a special case, with a stable source of finances in the form of profits from the sale of natural resources. Other examples have all been policy experiments designed to pre-test the effects of a basic income. In Finland, a center-right coalition government that came to power in 2015 launched an experiment in 2017 with a basic income for people unemployed for two or more years. The Canadian province of Ontario, the Spanish city of Barcelona, and the countries of India and Namibia have also experimented with cash payments to the low-income population based on minimal eligibility conditions. The Basic Income Earth Network (BIEN), a global alliance of basic income proponents, defines a basic income as “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.” The aforementioned policy experiments, however, fall short in terms of two of the most important conditions of a basic income, namely unconditionality and universality. This limits our interpretations of the outcomes of those experiments, confining them to examining effects on particular groups or particular circumstances rather than the general effects of a basic income.

The rural basic income system to be introduced by Gyeonggi Province is different from other basic income policy experiments in the past, in that the funds are to be provided to all residents of a given region rather than members of a particular group such as the unemployed or the low-income population. Under this system, a basic income is to be provided not only to farmers but also to people employed in other professions, without distinctions of age, income, employment status or other factors. Only one condition applies: residency in a particular region. In effect, the implementation of this policy will permit a comprehensive examination of the effects of a basic income on income stability, life satisfaction, willingness to work, working hours and other areas.

For the rural basic income to be a meaningful policy experiment, randomized controlled trials (RCTs) will need to be properly used as a scientific means of experimental design. An RCT requires the random selection of a control population to serve as a comparison group with those paid a basic income. This is necessary to distinguish whether the effects are the result of a basic income or arise due to the groups being inherently different. The Finnish basic income experiment drew global notice for adopting this approach, but the implementation of new policy measures midway through, which cut unemployment benefits to those not making an active effort to find work, prevented a rigorous examination of the policy effects of a basic income, in the sense that they altered the “willingness to work” in members of the experimental and control groups. In implementing the rural basic income, it will therefore be necessary to examine how it is linked to other policy measures and what their mutual effects are.

Beyond its aim of test-driving the basic income concept, the Gyeonggi Province rural basic income system is significant as a future-oriented policy measure serving Korea’s rural communities, which are threatened with depopulation and face growing disparities related to urban areas. According to Statistics Korea figures, the average income for a household consisting of two or more people as of 2019 totaled 66,160,000 won (US$58,830) in urban areas, compared with 41,180,000 won (US$36,620) for rural families. Another large gap was observed the same year in the aging rate, or the proportion of the total population aged 65 or older: 30.4% for rural communities vs. 13.8% for cities. In exchange for its gradual measures to open up markets for agricultural products, the South Korean government has introduced various support programs in the agricultural sector. It has supplied agricultural technology, supported agricultural industrialization and scale improvements, and issued direct payments based on total area under cultivation. But no policy measures have been able to reduce the income gap between urban and rural areas, or to prevent the outflow of the younger population from rural communities. Within rural communities, there have been growing disparities in the amounts of direct payments according to cultivated area. An additional limitation is the fact that support is focused solely on the heads of farming households.

While the rural basic income system that Gyeonggi Province is attempting may offer several lessons, there also needs to be an accurate understanding of its fundamental limitations. The beneficiaries of Finland’s basic income experiment were the long-term unemployed, and their comparison group consisted of other long-term unemployed persons receiving unemployment benefits. This points to clear limitations, in that the situation is clearly different from the general effects of a basic income: whereas unemployment benefits are reduced in accordance with money earned from working, a basic income is received on top of labor income. Yet in the case of this experiment, the design limitations have been less widely publicized than the outcomes in terms of days worked and life satisfaction. A limitation of Gyeonggi Province’s rural basic income system is the inability to observe basic income redistribution effects that arise as financial resources are secured. Observing the effects of the basic income-related tax hikes on willingness to work is also not possible. Instead, the rural basic income system allows observation of the effects of income stability on willingness to work, the multiplier effect of basic income within rural regions (i.e., the economic effect from serial expenditures), and associated effects on rural communities.

A number of issues with the rural basic income system also need to be resolved. To begin with, the rural regions where a basic income is to be provided need to be selected. To some degree, this selection of regions is fraught with inevitable conflict, since it involves distributing societal resources toward a particular group. Gyeonggi Province’s plan involves a primary selection of rural regions based on ten indicators, including the population decline risk index, the percentage of senior citizens in the population, the percentages of workers employed in agriculture and manufacturing, the rate of urban land usage, and the ratio of population to social welfare infrastructure. The final target regions are then to be selected from that group. As part of this process, scientific experimental designs need to be incorporated, together with efforts to minimize conflict. Other issues to be resolved include how to coordinate with other welfare benefits that are reduced when income rises and how to control for other policies with the potential to distort effects while the rural basic income is being paid out. Other crucial elements include spelling out which effects are to be examined through the rural basic income and what indicators will be examined later on.

The basic income system brings with it major changes that extend throughout the redistribution system, including taxation and social services. It is the sort of policy that can be implemented once popular support has been established after a debate over its side effects and other concerns and a comparison with other alternatives. The likelihood of the basic income approach or some alternative becoming a reality and having a positive practical impact depends on whether it has been adequately discussed in advance. In that sense, one of the most significant aspects of Gyeonggi Province’s rural basic income system is that it encourages an adequate discussion of basic income in general.

By Yoon hyeong-joong, visiting fellow at the Hankyoreh Economy and Society Research Institute

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