[Lee Myung-ho's Future Preview] New Deal in the Digital Age, Income Insurance

Widening Asset Polarization Due to COVID-19... Need to Reaffirm the Meaning of 'New Deal'
Decreasing Importance of Factories and Offices... Employment-Employee Forms Also Expected to Dilute
Diversification of Economic Activities Like Gig Work and YouTubers... Social Security Based on Income Needed

The COVID-19 pandemic has heightened demands for safety nets. Social distancing measures have posed threats to the livelihoods of self-employed individuals and service industry workers. Street shops have closed, suspended operations, or reduced business hours, barely holding on while waiting for the pandemic to end. It remains uncertain whether recovery will return to pre-pandemic levels, as COVID-19 has accelerated digital transformation.

Social distancing has instead led to increased sales and business expansion for digital and IT companies. Various online activities have surged. Not only have online shopping and food delivery services grown, but new lifestyles and consumption cultures such as video conferencing, online education, remote work, online performances, and the metaverse are taking root. For some, COVID-19 and digital transformation have brought livelihood threats and hardship; for others, they have opened new worlds of opportunity. Funds released to support those suffering from COVID-19 are flowing to those who have seized opportunities through digital transformation. This has deepened disparities in jobs, income, and assets. This is likely to become the 'new normal.' It is an era that requires new jobs, welfare policies, and systems suited to the new age.

Last July, the government announced the Korean New Deal, comprising the Digital New Deal and the Green New Deal, and recently added the Human New Deal to present Korean New Deal 2.0. Alongside policies to create new jobs through the Digital and Green New Deals, there are plans to strengthen safety nets through the Human New Deal. The focus is on investing in people and resolving inequality and gaps. To establish a nationwide employment safety net, the scope of employment insurance will be gradually expanded to include artists and workers in special employment types, and industrial accident insurance will also extend to more special employment categories. However, strictly speaking, this is an expansion of previous systems rather than something new.

The New Deal was a policy first implemented by U.S. President Franklin D. Roosevelt in the early 1930s. It was a response to the Great Depression, when unemployment rose from 4% in 1929 to 25% in 1933 following the stock market crash. Industrial production fell by 30%, and sectors such as lumber, mining, and agriculture also declined, while prices dropped, worsening hardships. Meanwhile, asset owners, white-collar workers, and service industry laborers suffered relatively less. Roosevelt began the New Deal with banking and financial reforms. He ended the gold standard for the dollar to allow easier currency issuance, leading to currency devaluation. Government finances were expanded to increase public investment. The New Deal is often associated with projects like the Hoover Dam and highway construction. The current government has linked investments in digital infrastructure, such as the 'Data Dam'?the digital era’s dam and highway?to the New Deal. While dams and highways created jobs for the unemployed and helped alleviate unemployment, they were not the core of the New Deal.

Because wealth polarization and the excessive power of capital caused the Great Depression, the New Deal focused on restoring economic dynamism through wealth balance. Labor laws and social security laws were introduced to strengthen and stabilize labor power. The right to form labor unions and engage in collective bargaining with capitalists?the rights to organize and bargain collectively?were guaranteed. Unemployment insurance and old-age pensions were introduced to ease workers’ anxieties. The conflict between entrepreneurs forming cartels and monopolies to accumulate wealth and workers engaging in violent strikes was alleviated. A balance between labor and capital was established, creating a relationship of concession and cooperation between labor and management. As industrial sites stabilized, companies focused on innovation and shared the fruits with workers, making the U.S. an economic powerhouse. This is known as the miracle of the New Deal.

What kind of New Deal does South Korea need today? COVID-19 confirmed that digital transformation is the future. Digital transformation is also necessary for climate change and achieving carbon neutrality by 2050. However, the pain experienced during the transition to digital transformation is not evenly distributed. There are significant concerns about labor exclusion, unemployment increases due to artificial intelligence (AI) and robotics. More companies and industries will lose competitiveness because of digital transformation. Resistance to digital transformation will grow. Amid such anxieties and concerns, the idea of basic income has emerged and gained support. It argues that existing jobs and social security systems are no longer effective.

Then, can nationwide employment insurance, which expands employment insurance coverage, be the solution? Can a basic income system that gradually increases government-provided living support payments be the answer? Social security systems, employment, and unemployment insurance schemes suited to the characteristics of the digital transformation era must be established. A key feature of the digital transformation and digital economy is the reduced importance of factories and offices. People can work anywhere, and companies want various forms of employment. Skilled individuals work as freelancers, contracting with multiple companies to perform tasks (labor). Not only traditional special employment workers but also those engaged in gig work and platform labor?neither employers nor employees but ambiguous statuses?are increasing. The number of people whose profession is being a YouTuber is also growing.

In the future, the relationship between employer and employee will become increasingly diluted. Employees may become business partners with whom they contract, or employers may undertake project contracts. Employment relationships will frequently change, and the number of one-person companies and self-employed individuals will rise. It is no longer realistic to expect an increase in traditional employment. Instead, the number of people earning income through various economic activities is growing. Promoting such economic activities is essential for developing the digital economy.

However, these individuals fall outside the scope of social security. Systems that require employment to qualify for social security enrollment are no longer valid. Labor laws and unemployment insurance created during the factory labor era now force a regression to an industrial economy. A system is needed to alleviate anxiety about income reduction when work decreases, even though income is earned through diverse economic activities. The Digital New Deal must be completed with a social security system for the digital era that allows anyone generating income through economic activities to enroll in income insurance and gain economic stability during hardships.