Understanding the Politics of Welfare Reform in Korea: A study of the National Health Insurance and National Pension Reforms, 1998-2003 by Chang-Gon Lee A thesis submitted to The University of Birmingham for the degree of DOCTOR OF PHILOSOPHY Institute of Applied Social Studies College of Social Sciences School of Social Policy University of Birmingham March 2015 Preface This dissertation is the result of my own work and includes nothing which is the outcome of work done in collaboration except where specifically indicated in the text Chang-Gon Lee University of Birmingham March 2015 Abstract This is my thesis that I explored the dynamic process and peculiarities of Korean welfare politics during the Kim Dae-Jung government of 1998-2003, which was the first administration to come to power through a peaceful turnover of political power. To this end, the research focused on the policymaking processes of National Health Insurance and National Pension reforms during that period. The thesis analysed these welfare reforms from a more rigorous theoretical framework in order to uncover the key characteristics of welfare politics in Korea. In particular, the key role played by stake-challengers including civil organisations in such policymaking process was addressed in detail because these Non- Governmental organisations emerged as an influential player against the established stakeholders representing vested economic and political interests. In contrast to the situation in many western democracies, the influence of political parties in the reform process was minimal and those parties did not play any significant part in the debates and conflicts surrounding the welfare reforms during the Kim Dae-Jung era. Interestingly, though, the National Assembly itself through democratic development did eventually emerge as a new player in this arena. This thesis also paid due regard to the role played by international agencies within the space of Korean welfare politics. It was noteworthyfact that stake- challengers coalition led by civil organisations was able to overcome stakeholder coalition’s interests and objections to win the battle for health insuranceintegration and public pension reforms in spite of limitations. Acknowledgements The completion of this thesis has taken me much longer than expected. There were many causes for this, both personal and professional. What started out as an up to the minute study has now become something more like contemporary history! However the core idea contained in this thesis is, I believe, still useful, meaningful and significant particularly for those with an interest in South Korean policy and politics. I combined studying for my doctorate as a PhD student in Birmingham with my job as a journalist in Korea. This proved a difficult task as the demands on my time as a journalist were very heavy. As a consequence I was unable to devote consistent amounts of time to my academic studies. However, I have now finally seen the thesis through to completion. Even though it is not the `perfect’ work I envisaged that I would write at the beginning I am now happy to submit it for examination. A number of scholars have helped me see my thesis through to completion. I am indebted first and foremost to my two supervisors Dr Robert Page, who has guided and supported me through the most difficult times of my research, and Ms Liz Ross, who has now retired. Thanks to my supervisors I have been able to complete this work. They really had to wait far too long for me to complete the thesis. I also have debts to repay to the many scholars, former civil servants, researchers and civil activists in Korea who helped me with my thesis by giving up their time to be interviewed. I am extremely grateful for their help. Finally I would like to dedicate this thesis to my mother, my wife and to my son anddaughter. Contents Chapter1:Introduction…………………………………………………………………..…………1 1. 1 Research Background: the new politics of welfare reform in Korea……………………...…1 1. 2. The Scope of the research……………………………………………………………………....8 1. 3 Aim of the research and the research questions……………………………………………….10 1. 4 The Organisation of this Research……………………………………………………………11 1.5 From Journalist to Social Scientist……………………………………………………………13 Chapter 2: ‘Productive welfare’ Reforms after the Economic Crisis (1998-2003)………………15 2. 1 Economic crisis and the crisis of the developmental welfare state…………………………15 2. 1. 1 The impact of the economic crisis…………………………………………………………15 2. 1. 2 The characteristics and the crisis of welfare developmentalism…………………………19 2. 2 The reform of the developmental welfare state and the introduction of productive Welfare…………………………………………………………………………………..……………23 2. 2. 1 The productive welfare of the Kim Dae-jung government………………………………23 2. 2. 2 The implementation of productive welfare reform…………………………………26 2. 3 Changes in the policy-making process…………………………………………………………37 2. 3. 1 The understanding of the policy-making process…………………………………………37 2.3. 2 Three interpretations of Korean welfare politics in terms of policymakiing process…38 2. 3. 3 The politics of the Tripartite Commission…………………………………………………41 2. 4 Concludingremarks……………………………………………………………………………43 Chapter 3: Research on Welfare Politics in Korea…………………………………………...45 3. 1 Competing theories; the politics of welfare development…………………………………….46 3. 1. 1 The state-centred approach…………………………………………………………………46 3. 1. 2 The class-centred approach…………………………………………………………………49 3. 1. 3 The historical institutional approach …………………………………………………52 3. 2 Theoretical discussions and theoretical applications to Korea………………………………55 3. 2. 1 Theoretical discussions; state, class, institutions, and welfare politics……………...........55 3. 2. 2 Theoretical applications to the Korean case………………………………………………58 3. 3 Concluding remarks……………………………………………………………………………61 Chapter 4: The Theoretical Framework and Research Methodology……………………………63 4.1 The key concepts for a theoretical framework on welfare politics……………………………63 4. 1. 1 The policy-making process, socio-economic structure, and political variables….............63 4. 1. 2 The decision-making point, policy legacies, policy actors, and policy feedback…...........67 4. 1. 3 Critical juncture, Institutions of interest representation, and Political-social coalitions ……...............................................................................................................................70 4. 2 Theoretical Framework: the new politics of welfare reform…………………………………73 4. 2. 1 Beyond institutions and path dependency…………………………………………………73 4. 2. 2 Revisiting power resources action………………………………………………….............77 4. 2. 3 Politics of the stakeholder and stake challenger coalitions………………………………83 4.3 Research Methodology…………………………………………………………………………87 4.3. 1 Revisiting the research questions…………………………………………………………87 4. 3. 2 Outline of the research design…………………………………………………….............88 4. 3. 3 Historically oriented interpretative policy analysis………………………………90 4. 3. 4 Data characteristics and data collection…………………………………………………92 4. 3. 5 Performing the documentary data collection……………………………………………97 4. 3. 6 Interviews with policy change participants……………………………………………99 4. 3. 7 Data analysis…………………………………………………………………………….102 4. 3. 8 Personal advantage………………………………………………………………………103 4. 4 Concluding remarks…………………………………………………………………………103 Chapter 5: The politics of health insurance reform in Korea…………………………………105 5. 1 Overview of the health insurance system in Korea…………………………………………106 5. 1. 1 A brief history of health insurance in Korea……………………………………………107 5. 1. 2 A basic overview of NHI in Korea………………………………………………………108 5. 1. 3 The Origin of NHI…………………………………………................................................113 5. 1. 4 From voluntary insurance to compulsory insurance……………………………………119 5. 2 The administrative arrangements of pre-reform health insurance…………………….125 5. 2. 1 The arguments behind the controversy on health insurance integration……………126 5. 2. 2 The fragmented system and the interests of the ruling coalition………………………130 5. 3 The political dynamics of pre-reform health insurance integration………………………131 5. 3. 1 The initiation and extension phases (1980-1986); the first battle between separatists and unionists…………………………………………………………………………………………….132 5. 3. 2 The social movement phase (1988–1990): the second battle and veto power…………136 5. 3. 3 The showdown between stakeholders and stake challengers…………………………139 5. 3.4 The stake challengers’ counterattack and strategies……………………………………143 5. 4 The politics of health insurance since the economic crisis: the institutional integration phase (1997–2003)………………………………………………………………………………………..146 5. 4. 1 The emergence of new actors and new politics………………………………………….146 5. 4. 2 The integration of health insurance administration……………………….....................149 5. 4. 3 Fiscal integration…………………………………………………………………………153 5. 5 Concluding remarks………………………………………………………………………….159 Chapter 6: The welfare politics of national pension reform in Korea……………….................160 6. 1 Overview of the National Pension Scheme (NPS) in Korea………………………………162 6. 1. 1 A brief history of the NPS…………………………………………………………………163 6. 1. 2 A basic overview of the Korean NPS……………………………………………………165 6. 2 Pension politics under the authoritarian regimes; the formation of the NPS……………169 6. 2. 1 The origin of the NPS………………………………………………………………………170 6. 2.2 Bureaucratic Politics: the policy-making process of the NWP enactment……………174 6. 3 Implementation and expansion