{"id":2204807,"date":"2024-04-23T18:26:40","date_gmt":"2024-04-23T09:26:40","guid":{"rendered":"https:\/\/koreapro.org\/?p=2204807"},"modified":"2024-04-24T20:04:21","modified_gmt":"2024-04-24T11:04:21","slug":"why-universal-cash-handouts-would-have-unintended-consequences-for-south-korea","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/04\/why-universal-cash-handouts-would-have-unintended-consequences-for-south-korea\/","title":{"rendered":"Why universal cash handouts would have unintended consequences for South Korea"},"content":{"rendered":"
South Korean President Yoon Suk-yeol and main opposition Democratic Party (DP) leader Lee Jae-myung are expected to meet for the first time this week, a rare concession by Yoon after his party\u2019s election defeat earlier this month, and a key item on the agenda will likely be Lee\u2019s <\/span>proposal<\/span><\/a> to provide approximately $180 (250,000 won) to every citizen.<\/span><\/p>\n It remains to be seen whether Yoon and Lee will be able to reach an agreement on this proposal, which Lee estimates will cost about $9.5 billion (13 trillion won), but experts argue that, if adopted, such cash handouts could have an array of unintended consequences, including exacerbating existing economic challenges like inflation.<\/span><\/p>\n REGRESSIVE MEASURES<\/b><\/p>\n Lee argues that providing a one-time payment of 250,000 won to every citizen would alleviate the financial burden on households, offering much-needed relief to families struggling to cope with high inflation rates.<\/span><\/p>\n This direct financial support could help households meet their essential expenses and maintain a basic standard of living, particularly for those in lower-income brackets who have been disproportionately affected by rising prices, according to the DP.<\/span><\/p>\n However, the measure may not be as equitable as proponents claim.<\/span><\/p>\n \u201cThe defining characteristic of a progressive tax system is that people who earn higher incomes pay higher tax rates. But this proposal to disburse funds to everyone at a flat rate ignores that principle,\u201d Hong Ki-yong, a professor at the Business School of the University of Incheon, told <\/span>Korea Pro<\/span><\/i>.<\/span><\/p>\n \u201cThat is counterproductive. It will end up benefiting the wealthy instead of low-income households,\u201d Hong added, as the infusion of 13 trillion won into the economy would cause demand-pull inflation, especially for consumables, which would \u201cmake the poor poorer.\u201d<\/span><\/p>\n While Lee argues that his proposal would help to \u201cresolve the country\u2019s economic emergency,\u201d Hong warned that it wouldn\u2019t help to support vital sectors such as manufacturing.<\/span><\/p>\n \u201cIf they go through with it, this cash handout will be disbursed as local gift certificates. While that might be helpful for low-income families, there\u2019s not much that people can buy in their local neighborhoods with this money. The money will be spent almost entirely on consumables like food, which doesn\u2019t help from a national perspective.\u201d<\/span><\/p>\n\n