[Issue Analysis] "Financial Product? Welfare Policy?"... The Dilemma of Cheongnyeon Huimang Jeokgeum

Only Those with Income Below 36 Million KRW Eligible
Asset Ownership Not Considered, Sparking Inequality Debate
Presidential Candidates Flood with Related Pledges
Youth Leap Account Closer to Welfare

[Image source=Yonhap News]

[Asia Economy Reporter Shim Nayoung] "A friend whose parents own a house in Gangnam can join because their part-time job income is low, but I, from the countryside renting a monthly lease room, was disqualified for earning over 40 million KRW annually." "A law exam student with no income is more unfortunate but not eligible. The sense of relative deprivation has only grown."

On the 25th, the fifth day since the launch of the Youth Hope Savings, complaints from young people who do not meet the eligibility criteria continue to appear on internet communities. The conditions "only those with income below 36 million KRW allowed" and "asset ownership not considered" are seen as unfair. This was not an unexpected issue for officials at the Financial Services Commission and the Ministry of Economy and Finance who have been preparing this policy since last year. So why did the Youth Hope Savings set such eligibility conditions?

The Financial Services Commission's stance is that "Youth Hope Savings is a financial product, not a welfare policy." If welfare aims to ensure fairness by prioritizing those in difficult situations to benefit evenly, financial products are created prioritizing individual income. Therefore, the asset size of parents and the individual was excluded from eligibility criteria, and those without income were excluded from the target group.

A Financial Services Commission official said, "If someone has no income and has not asked for help from anyone, it would be impossible to save. Without an income criterion, other problems would have arisen." While regular bank savings accounts can be opened without any income, Youth Hope Savings requires clear criteria because the government adds up to 360,000 KRW in support funds. It is explained as a financial product that gives working youth an opportunity to build a lump sum using the support funds as a trigger.

As young people rushed to bank branches to join Youth Hope Savings, even presidential candidates stepped forward. "Through about a 10% preferential interest rate and national incentive support over five years, we will enable youth to save 50 million KRW" (Lee Jae-myung, Democratic Party candidate). "We will create a Youth Leap Account supporting youth asset formation of 100 million KRW" (Yoon Seok-youl, People Power Party candidate).

Among these, Yoon’s Youth Leap Account is much closer to a welfare policy. It sets four income brackets and provides monthly government support funds of 400,000 KRW (annual income below 24 million KRW), 200,000 KRW (24 million to 36 million KRW), and 100,000 KRW (36 million to 48 million KRW) to subscribers according to income. Those earning above 48 million KRW receive tax-exempt benefits.

For subscribers in the lowest income bracket, if they deposit 300,000 KRW monthly, government money (400,000 KRW monthly) is also deposited into their account. The goal is to save 100 million KRW by accumulating 700,000 KRW monthly for 10 years. The budget set for the five-year presidential term is a total of 7.5 trillion KRW. The plan is to recruit 700,000 subscribers with this fund. Compared to the initial plan for Youth Hope Savings (380,000 subscribers, 45.6 billion KRW budget), the number of eligible subscribers is less than double, but the government support scale is so large that the budget exceeds 160 times.

Kim Soyoung, head of the economic policy team at the campaign and a professor at Seoul National University, stated, "Eligibility will be determined not only by the individual’s asset size but also by the parents’ asset size," and added, "Unlike Youth Hope Savings, the Youth Leap Account is effectively a welfare policy."