More than 10 local governments nationwide are providing 'living recovery support funds' to residents for the Lunar New Year. They are giving between 100,000 won and 500,000 won per person to all residents, either in local currency or gift certificates. The aim is to stimulate the local economy.
However, there are counterarguments. The local governments providing living recovery support funds have been shown to have lower fiscal self-reliance than average. It is said that they are spending between 5 billion and 50 billion won to distribute these funds. Research results also indicate that if support funds are given universally regardless of residents' income levels or fiscal conditions, the effects will be minimal.
◇12 local governments to provide living support funds to residents
As of the 28th, a total of 12 local governments across the nation have decided to provide living recovery support funds to local residents in conjunction with the Lunar New Year holiday.
In Jeollabuk-do, five places including Gimje, Wanju, Jeongeup, Namwon, and Jinan are providing support funds. In Jeollanam-do, three places including Yeonggwang, Naju, and Boseong have also decided to provide these funds. Paju in Gyeonggi-do, Eumseong in Chungcheongbuk-do, and Jeongseon in Gangwon-do are doing the same.
The places giving the most funds are Yeonggwang in Jeollanam-do and Gimje in Jeollabuk-do, providing 500,000 won per person. Yeonggwang also plans to grant 500,000 won per person during Chuseok. The other local governments will distribute between 100,000 won and 300,000 won each.
To this end, the local governments have once again revised the budget they finalized last year. They have postponed some of the projects planned for this year to next year, or have abandoned them entirely. This revised budget was confirmed through procedures such as supplementary budgets by city and county councils.
Yeonggwang in Jeollanam-do has prepared the largest budget for providing living recovery support funds at 52.4 billion won. This amount reflects the cost of giving 500,000 won per person during both the Lunar New Year and Chuseok. Following this are Paju in Gyeonggi-do (52 billion won), Gimje in Jeollabuk-do (40.4 billion won), Jeongeup in Jeollabuk-do (30.8 billion won), Wanju in Jeollabuk-do (30 billion won), Gwangmyeong in Gyeonggi-do (29.5 billion won), and Namwon in Jeollabuk-do (23.2 billion won). Other local governments have prepared budgets of around 10 billion won. Naju in Jeollanam-do (11.7 billion won), Boseong in Jeollanam-do (11.2 billion won), Jeongseon in Gangwon-do (10 billion won), Eumseong in Chungcheongbuk-do (9.3 billion won), and Jinan in Jeollabuk-do (4.8 billion won) are among them.
◇All local governments providing support funds fall short of national average in fiscal self-reliance
The fiscal self-reliance of the 12 local governments that have confirmed the provision of living recovery support funds is all found to be below the national average (48.6%).
In the case of Boseong in Jeollanam-do, the fiscal self-reliance was just 9.8%, remaining in single digits. Following this, there are seven local governments with fiscal self-reliance in the 10% range: Namwon in Jeollabuk-do (11.3%), Yeonggwang in Jeollanam-do (12.1%), Gimje in Jeollabuk-do (12.5%), Jeongeup in Jeollabuk-do (13.6%), Jinan in Jeollabuk-do (16%), Naju in Jeollanam-do (16.8%), and Jeongseon in Gangwon-do (15.4%).
The fiscal self-reliance of other local governments is shown to be 20% for Wanju in Jeollabuk-do and 24% for Eumseong in Chungcheongbuk-do. Gwangmyeong (44.5%) and Paju (36%) have a higher level of fiscal self-reliance compared to these local governments, but still fall below the national average.
Andong-hyun, a professor of economics at Seoul National University, noted that “local governments with low fiscal self-reliance may need to request additional fiscal transfers from the government if their budgets run short due to the provision of living recovery support funds,” adding that “this will ultimately lead to government resources being allocated for some local governments.”
◇Local economy stimulation vs. 'Universal payments have no effect'
Opinions about the effectiveness of living recovery support funds are mixed. Local governments believe that the support funds will play a significant role in revitalizing the local economy.
However, there is also analysis indicating that the economic effects of disaster relief funds distributed to all citizens during the serious COVID-19 outbreak in 2020 were limited. The Korea Development Institute (KDI) reported that the increase in consumption resulting from the expenditure of the disaster relief funds (14.3 trillion won) was maximally 36.1%. This suggests that about two-thirds of the total funds did not produce any significant effect.
Consequently, it has been suggested that it would be more effective to selectively support vulnerable groups. Kim Sang-bong, a professor of economics at Hansung University, stated that “if residents do not increase their additional consumption from the received support funds, the effect will be limited,” emphasizing that “rather than giving to all residents, it would be more effective to concentrate the higher per-person payments on vulnerable groups.”
Professor Andong-hyun remarked that “it has been shown that universal support during the COVID-19 disaster relief funding had minimal effects,” and noted that “the indiscriminate populism seen in some local governments is a problem.”