The OECD’s Social Expenditure Database (SOCX) was established and has been maintained to facilitate cross-national comparisons of public and private social expenditures. The OECD compiles long-term time-series SOCX statistics using its definitions of social expenditures and category codes, and, to avoid double counting, does so in coordination with its other statistical databases, such as those covering education and health spending. Since joining the OECD, Korea has participated in compiling SOCX statistics, with the Korea Institute for Health and Social Affairs (KIHASA), together with the Ministry of Health and Welfare, consistently collecting data from the outset on social welfare expenditure programs administered by both central and local governments, as well as on private-sector social welfare expenditures. However, as the SOCX is modeled on the European System of Integrated Social Protection Statistics (ESSPROS), it should not be assumed that all OECD countries compile their national data for the database fully in accordance with the common SOCX manual. The OECD thus allows member countries a certain degree of discretion―recognizing differences in their budget systems and welfare benefit structures―when compiling their national data for the SOCX. Therefore, understanding each country’s statistical overview (Country Note) is necessary when interpreting SOCX data, and meaningful cross-national comparisons require familiarity with each country’s social welfare system. The October issue of Health and Welfare Forum focuses on the “Current State and Challenges of the SOCX,” featuring articles that present finalized expenditure data for 2020 and 2021 from the SOCX 2025 update. Drawing on this data, the authors analyze and compare national expenditures and fiscal burden indicators, examine social spending on health and families, and conduct policy simulations. This issue also includes a structural analysis of public and private pension expenditures in selected OECD countries, an examination of Korea’s public and private social expenditures and net social expenditures, and a discussion of the resulting policy implications. We hope this issue marks another step toward further stabilizing the data compilation process for the SOCX―the only database enabling cross-national comparisons of social welfare expenditures in OECD countries―and toward fostering follow-up analyses across different policy areas.

According to the latest OECD SOCX update announced in April this year, Korea’s public social expenditure as a share of GDP was 15.2 percent in 2021. This figure, representing about 70 percent of the OECD average of 22.1 percent, indicates that a significant gap in overall welfare expenditure remains between Korea and other OECD countries. In some policy areas―such as unemployment, housing, and active labor market programs―Korea spends more than the OECD average, whereas in pensions and family benefits, its social expenditure as a percentage of GDP is substantially lower than that of other OECD countries. Korea’s social welfare expenditure has increased at an average annual rate of 7.6 percent from 2011 to 2021, growing especially rapidly in the wake of the COVID-19 pandemic. This reflects a remarkable expansion of the social welfare infrastructure in a relatively short span of time. Yet, challenges remain in mobilizing resources on a large scale for emergency responses and in ensuring stable funding for continued service provision. Our findings suggest that Korea’s welfare system requires a shift toward greater support for old-age and family-related programs, enhanced private-sector involvement, and policies that promote productivity through welfare. Welfare expenditure should be viewed not as a cost, but a driver of future growth as Korea pursues the goal of an inclusive, sustainable welfare state.

Since becoming what is known as an “aged society,” Korea has seen increases in its social welfare expenditure, tax burden, and government debt ratio, narrowing the gap with OECD averages. As of 2023, with 18.2 percent of its population aged 65 and over and welfare spending and fiscal burden still relatively low, Korea appears to have more room for expansion than other OECD countries with comparable aging populations. However, as the proportion of the elderly population continues to rise rapidly in the coming years, social expenditures are likely to increase in old-age income protection, healthcare, and long-term care. As a long-term result of the persistent low birthrates, a surge is likely in the old-age dependency ratio. These trends highlight the need for financial risk management to ensure the sustainability of social welfare and for policies that are more responsive to the changing socioeconomic needs.

In 2023, Korea’s social welfare spending on health totaled an estimated KRW 120.1-140.0 trillion, equivalent to 5.0-5.8 percent of GDP, below the OECD average of 6.5-7.5 percent. This is partly because Korea’s national health expenditure as a share of GDP is lower than the OECD average (8.5 percent vs. 9.3 percent), but mainly because public financing accounts for a much smaller portion (60 percent vs. 73 percent) of total spending. Publicly financed health spending grew at an average annual rate of 9.3 percent between 2001 and 2023, rising from KRW 16.3 trillion to KRW 113.1 trillion. Breaking this down, the National Health Insurance expanded by 9.0 percent per year, Medical Aid by 8.4 percent, and Long-Term Care Insurance for the Elderly―introduced in 2008―by over 15 percent, reflecting Korea’s rapidly aging population. While rapid growth in national health expenditure increases the burden on households and the government and thus requires control, investing public resources remains essential to expand health coverage and promote social welfare. The scale of health-related social expenditure is by nature determined by these two imperatives in tension with one another.

In this study, I analyze Korea’s social expenditures related to family policies in comparison with those of other OECD countries and make simulation-based expenditure projections through 2030. This study finds that while Korea’s family policy expenditure structure, oriented toward in-kind support, has lent itself to improved services and greater public provision in early childhood education and care, spending on family allowances and parental leave benefits has consequently remained disproportionately low, falling far short of the OECD average. The expenditure on family-related benefits increased in absolute terms over the period 2019-2022. As a share of GDP, however, the increase is only from 0.30 percent to 0.39 percent for cash benefits and from 0.99 percent to 1.26 percent for in-kind benefits. For Korea’s family-related expenditure to reach the OECD average by 2030, an additional outlay of KRW 27-32 trillion would be required―a goal achievable only through active expenditure expansion. The findings suggest that Korea’s family policy must broaden its current focus on care services to include increased cash support, especially in child benefit, family benefits, and paid parental leave.

This study provides a comparative assessment of changes in spending on public and private pension programs in selected OECD countries since 2000, using the OECD’s SOCX. Public pension expenditures are measured as a percentage of GDP, while private pension expenditures are represented by the ratio of pension fund assets to GDP―a stock concept serving as a proxy for expenditure. The findings show that in Continental and Southern European countries, reliance on public pensions remains high, with expenditures accounting for about 15 percent of GDP, compared to 5 to 8 percent in Anglo-American and some Northern European countries. Regarding pension fund assets as a share of GDP, there are significant differences between countries: the ratio exceeds 100 percent in the Netherlands, Switzerland, and Anglo-American countries, but is substantially lower in Southern European countries and Germany. Although it has risen rapidly in recent years following the expansion of retirement pensions, Korea’s ratio remains below the OECD average. Across most of the years since 2000, there is a pattern of negative correlations between public pension expenditures and private pension assets and positive correlations between the old-age dependency ratio and public pension expenditures. It should be noted that both of these patterns are of observed relationships and do not indicate definitive causality. Despite these limitations, this study is valuable because it explores global trends in the structural changes of public and private pensions, examines Korea’s standing relative to the rest of the world, and provides basic data for understanding future developments.

Premised on the recognition that it is difficult by indicators of public social and total social expenditures alone to arrive at a precise measure of the size of a welfare state, this study in its analysis of 2001-2021 OECD SOCX data incorporates net social expenditure, the net tax effect, and private social expenditures. The net tax effect is defined as the difference between the amount clawed back through the taxation of welfare benefits and the value of tax breaks for social purposes (TBSPs) comparable to cash benefits. The analysis yielded several findings. First, Denmark, Finland, France, and Germany exhibited a large net tax effect (6-7 percent), indicating a “high expenditure, high claw-back” type, while Australia and the United States displayed a pattern of “high reliance on taxation and private spending.” During the period, Korea’s gross social expenditure as a share of GDP was either roughly equal to its net social expenditure in some years―for example, 18.8 percent and 18.7 percent in 2021―or even lower in others, when the net tax effect turned negative. Second, in many countries since the 2010s, variations in the net tax effect―the difference between gross and net social expenditures―have increasingly been driven by the claw-back factor. Germany and France saw their net tax effect increase over time due to stronger claw-back measures and reduced TBSPs, while in Korea, the US, and the UK, the net tax effect remained low, with an embedded mixture of claw-back measures and TBSPs. Third, the analysis found that the larger the net tax effect as a percentage of GDP, the more significant was the decrease in in the Gini coefficient. Our decomposition of the net tax effect attributes much of the distributive improvement to claw-back taxation and little of it to TBSPs. At times such as now when welfare benefits are becoming increasingly universal, Korea stands in need of revamping taxation and claw-back regulations on welfare benefits and restructuring the management of its continuously growing TBSPs.