The Effects of the National Basic Livelihood Security System on labor supply

국민기초생활보장제도의 노동공급 효과

  • Published : 2004.05.31

Abstract

The National Basic Livelihood Security System implemented from October 2000 has expanded cash assistance to cover the poor households that have work ability. The cash assistance for the households with work ability has positive aspects of providing basic livelihood security for all people, but many people have worried about its negative aspects such as the decrease of labor supply among the low-income people with work ability. However, there has been few study that evaluated the effects of the NBLS implementation on labor supply. One of the reason for this may be related with the difficulty of research methodology that there were neither program group nor control group, because NBLS was implemented for all the people at the same time. This study suggests alternative program groups and control groups based on work ability and education. Using wave1 to wave5 data of the Korean Labor and Income Survey, this study estimated the effects of the NBLS implementation on employment and work hours. A difference-in-difference approach was applied to these alternative program and control groups. I found that the implementation of NBLS did not have any statistically significant effects on employment an work hours. It is too early to conclude from this result that cash assistance for the poor households with work ability does not induce any labor supply decrease in Korea. Rather, I interpret this result as reflecting that the NBLS system was too limited to induce any sizable decrease of labor supply or that the work requirement imposed on the recipients with work ability was effective in deterring work disincentive among the low-income population. Future research need to explore better program and control groups and investigate long-term effects.