Large-scale Disaster Relief Payments Found to Have Mitigated Poverty and Inequality Shocks

• ■COVID-19 has led to a decline in market income and adversely affected its distribution. However, the distribution of emergency relief payments in May 2020 and the COVID-19 Coexistence National Support Funds in September 2021 have increased disposable income.
  
  

• ■Universal disaster relief payments have proven effective not only for groups whose income decreased due to COVID-19 but also for supporting low-income households unrelated to the pandemic.
  
  

• ■In response to large-scale economic crises, there is a need to shift from a selective income security strategy, which focuses on supporting the elderly and the poor, to a universal social insurance strategy.

KIHASA has published the Health and Welfare Issue & Focus, No. 450, entitled ‘Income Distribution and the Effect of Public Transfers, Before and After COVID-19.’ The lead author is Dr. Lee Won-jin, a fellow at KIHASA’s Department of Poverty and Inequality Research.

Dr. Lee said, "This study was conducted to thoroughly assess the income and poverty shocks caused by COVID-19, evaluate the role of various disaster relief payments and the income security system, and explore strategies to effectively respond to similar large-scale economic crises in the future."

Dr. Lee explained, "To precisely estimate the impact of COVID-19, it is essential to consider the trends that preceded the pandemic." He further stated, "We analyzed changes in income distribution before and after COVID-19 using data from the Household Finances and Living Conditions Survey for the income years 2016 to 2021."

He emphasized, "While COVID-19 had a negative impact on market income levels and poverty during its initial spread in 2020, the expansion of public transfers prevented this from leading to a shock in disposable income." He added, "The overall analysis of the effects of public transfers before and after COVID-19 suggests that there is a need to shift from the traditional, targeted income protection approaches that focus on supporting the elderly and the poor to more effective and efficient strategies for responding to large-scale economic crises."

Summary of the Brief:

• ■To better respond in the future to such large-scale economic crises as the one caused by the COVID-19 pandemic, strategies should be developed based on a thorough assessment of the pandemic’s effects on income and poverty and a precise evaluation of the extent to which disaster relief payments and the National Basic Living Security Scheme mitigated these effects.
  
  

• ■The pandemic in its early stage had negative effects on market income levels and the poverty rate; however, by 2021, these effects had diminished. COVID-19’s impact on market income did not lead to a disposable income shock, thanks to public transfers.
  
  

• ■Our analysis suggests that to respond effectively and efficiently to future economic crises, the policy focus should shift from the traditional, targeted income protection approaches―such as those concentrating support on older persons and those in poverty―to a universal application of social insurance, specifically a major expansion of employment insurance coverage.