🚨 New Government Inclusive Growth Strategy
Today Korean Economic News for Beginners | 2025.08.23
0️⃣ 'Growth for All Citizens' Declaration Covering Working Class, Youth, and Small Business Owners
📌 Comprehensive Package of Venture Investment, Small Business Support, Welfare Expansion, and Housing Stability for Inclusive Growth
💬 The government announced a new economic growth strategy declaring "growth that everyone can enjoy." The core of this strategy is comprehensive growth that is not focused on specific groups. It includes wide-ranging support measures: expanding investment in venture companies, reducing financial burden on small businesses, raising the median income standard by 6.51%, housing stability measures for youth and middle class, and nationalizing care services. The government plans to create jobs by expanding venture investment using pension funds and parent funds, help small business owners breathe easier through expanded refinancing loans and reduced card fees, and improve living stability for working-class families by raising welfare support standards. The government emphasized it will revitalize the people's economy and achieve balanced growth across society.
1️⃣ Easy to Understand
The new economic policy announced by the government can be summarized as "making sure all citizens can equally enjoy the benefits of economic growth." Until now, policy benefits were often concentrated on large companies or specific industries, but this time they have prepared comprehensive support measures covering everyone from working class to youth and small business owners.
First, let's look at venture companies and startups. The government announced it will greatly increase investment in promising venture companies using pension funds like the National Pension and Private School Pension. It also plans to expand the size of government-operated parent funds to help early-stage companies get the money they need more easily. This is expected to create more innovative companies and many new jobs.
The measures for small business owners and self-employed people are also specific. The most notable is the expansion of refinancing loans. For example, if a chicken restaurant owner is currently borrowing at 5% annual interest, they will be able to switch to a loan with lower interest rates. The government also plans to reduce card fees to lower the burden of fees paid to card companies from sales. In addition, they said they will provide AI technology-based business support services to help small business owners analyze sales and manage inventory more efficiently.
The welfare expansion for working-class families is also noteworthy. Raising the median income standard by 6.51% means raising the baseline for receiving welfare benefits. For example, if a family with monthly income of 2 million won was previously excluded from welfare support, they may now be included. For students, they said they will expand the "1,000 won breakfast" program to reduce education costs.
Housing stability measures for youth and middle class will also be strengthened. Monthly rent tax deductions will be applied to each spouse separately to reduce housing costs for newlyweds, and homeowners will be able to receive monthly rent support regularly. The government also announced it will provide care services under national responsibility and expand data relief options to reduce communication costs.
In the end, this policy can be called an inclusive growth strategy that allows all citizens to share the benefits of economic growth equally, rather than having a few people monopolize them.
2️⃣ Economic Terms
📕 Median Income Standard
Median income standard refers to the income level that falls exactly in the middle when all household incomes are arranged in order.
- It serves as an important baseline for determining welfare support eligibility and benefit amounts.
- When the median income standard increases, more households can receive welfare benefits.
- If the 2025 median income standard is raised by 6.51%, recipients of basic livelihood benefits, medical benefits, housing benefits, etc. will expand.
📕 Refinancing Loan
A refinancing loan is a system that allows switching from existing high-interest loans to loans with lower interest rates or better conditions.
- It can reduce financial cost burden and greatly help working people and self-employed individuals.
- Government-supported refinancing loans have lower interest rates and better conditions than regular bank loans.
- If refinancing loans for small businesses are expanded, the interest burden on self-employed people is expected to decrease significantly.
📕 Inclusive Growth
Inclusive growth is a growth method where the benefits of economic growth are distributed evenly throughout society rather than being concentrated only on specific groups.
- It is a policy philosophy that pursues growth of the entire economy while reducing inequality.
- It has the effect of activating the domestic market by increasing the consumption capacity of lower-income groups.
- It is important for reducing social conflict and creating a foundation for sustainable economic growth.
📕 Pension Fund Investment
Pension fund investment means operating the reserves of public pensions like the National Pension and Private School Pension in various investment destinations.
- The goal is to secure long-term returns while contributing to national economic development.
- Increasing venture company investment helps create innovation ecosystems and jobs.
- However, balancing return generation with public purposes is an important challenge.
3️⃣ Principles and Economic Outlook
✅ Economic Background of Inclusive Growth
Let's analyze why the government is pursuing inclusive growth and its economic effects.
First, there is growing awareness that deepening income inequality is becoming an obstacle to economic growth. Income inequality in Korea has continued to worsen in recent years. The income concentration of the top 10% of households continues to increase, while the income share of the bottom 50% of households is decreasing. In this situation, the number of people with consumption capacity decreases, shrinking the domestic market. Lower-income groups use most of their income for consumption, while upper-income groups have high savings rates, so the more severe inequality becomes, the more overall consumption decreases. The government's strategy aims to break this vicious cycle and expand the consumption base to activate domestic demand.
Second, social stability is threatened by middle class decline and deepening polarization. The driving force behind Korea's past economic growth was a thick middle class. However, the middle class has continued to shrink recently, deepening social polarization. Young people are increasingly giving up marriage and childbirth because employment is difficult and housing cost burden is high, and small business owners are suffering from business difficulties due to high rent and rising labor costs. If this situation continues, social conflict will increase and sustainable economic growth will become difficult. The government aims to promote social stability by allowing all classes to enjoy the benefits of economic growth through this policy.
Third, it is time to secure long-term growth momentum through creating innovation ecosystems. There is growing recognition that traditional manufacturing-centered growth models have limitations. Therefore, the government aims to create new growth momentum by greatly increasing investment in venture companies and startups. Expanding pension fund investment has the effect of creating an environment where innovative companies can grow stably, beyond simply providing money. This will help Korea transition to a high value-added economy based on advanced technology and innovation in the long term.
Inclusive growth is not simple welfare expansion but a strategic choice for sustainable growth of the entire economy.
✅ Policy Effects and Ripple Effects
Let's examine the specific impacts this policy will have on each sector and class.
First, expanding venture investment will greatly help job creation and innovation ecosystem formation. When pension fund investment increases, venture companies can grow more stably. Startups that had difficulty securing funds in early stages are expected to benefit greatly. Considering that each venture company creates an average of 50-100 jobs, investment expansion could create tens of thousands of new jobs. Also, when these companies succeed, a virtuous cycle structure is created where follow-up investment and entrepreneurship are activated. However, since pension funds are citizens' retirement funds, investment risk management is an important challenge.
Second, small business support measures will contribute to stabilizing the self-employed ecosystem. Expanded refinancing loans could reduce small business owners' interest burden by tens of thousands to hundreds of thousands of won annually. Reduced card fees can also save costs equivalent to 2-3% of sales. For a restaurant with monthly sales of 30 million won, annual card fees alone exceed 6 million won, but if the fee rate drops by just 0.5 percentage points, they can save 1.5 million won. With AI-based business support added, small business owners' competitiveness is expected to improve significantly.
Third, welfare expansion and housing stability measures will increase consumption capacity, leading to domestic demand activation. It is estimated that about 500,000 households will additionally receive welfare benefits from the 6.51% increase in median income standard. The basic livelihood benefits and housing benefits these households will receive mostly lead to consumption, helping activate local economies. Reducing young people's monthly rent burden will also increase disposable income, leading to increased consumption. If 100,000-200,000 won in housing costs per household is saved monthly, that much more money becomes available for other consumption.
Each policy is expected to create synergy effects by being interconnected rather than implemented individually.
✅ Future Challenges and Sustainability
Let's examine the challenges for successful policy implementation and long-term sustainability.
First, balancing fiscal soundness with welfare expansion is an important challenge. Government spending is expected to increase significantly due to median income increases and expansion of various support measures. Welfare spending alone could increase by several trillion won annually. To handle this, securing tax revenue or adjusting spending in other areas is necessary, but this could result in increased fiscal deficits or passing burdens to future generations. Therefore, it is important to continuously monitor policy effects while improving fiscal management efficiency.
Second, when expanding venture investment, both investment returns and risk management must be considered simultaneously. Expanding pension fund investment is good, but it must be managed carefully since it involves citizens' retirement funds. Venture investment can expect high returns but the risk is equally high. It should be considered that 8-9 out of 10 startups receiving investment may fail. Therefore, systems to minimize investment risk through portfolio diversification, expert evaluation, and post-management are necessary. Structural mechanisms to ensure investment returns go back to pension subscribers must also be established.
Third, an integrated approach that maximizes linkage and synergy effects between policies is needed. If these policies are implemented individually, effects may be limited. For example, synergy effects can be created by linking small business support with youth job creation, or combining venture investment with university R&D. Customized policy design considering regional characteristics is also important. Since situations differ between Seoul and provinces, manufacturing-centered regions and service-centered regions, region-specific policies may be more effective than uniform application.
For policy success, active private participation and continuous monitoring must support the government's will.
4️⃣ In Conclusion
The government's new inclusive growth strategy is an important attempt showing a paradigm shift in Korea's economic policy. It is evaluated as clearly showing the will to pursue a 'virtuous cycle of growth and distribution' rather than the previous 'growth first, distribution later' approach.
The biggest significance of this policy lies in the philosophical shift toward ensuring that the fruits of economic growth are shared equally by all of society rather than monopolized by a few. The comprehensive nature can be seen in how venture investment expansion for job creation, reducing small business financial burden, expanding welfare support standards, and housing stability support are organically connected to improve the quality of life for all citizens.
What is particularly noteworthy is that it pursues structural improvement beyond simple cash support. Using pension funds for venture investment creates innovation ecosystems to build long-term growth momentum, and AI-based business support can fundamentally improve small business competitiveness. This approach will help build sustainable self-reliance rather than temporary support.
However, several challenges must be resolved for successful implementation. The most important is fiscal soundness. As government spending increases significantly due to welfare expansion and various support measures, fiscal balance must be maintained through securing tax revenue and improving spending efficiency. Also, when expanding pension fund investment, professional management considering both returns and safety is needed.
Maximizing synergy effects between policies is also an important challenge. Rather than implementing venture investment, small business support, welfare expansion, and housing stability individually, they should be interconnected to create synergy effects. For example, linking venture company youth employment with housing support, or combining small business digital transformation with local economic activation.
Above all, this policy must be consistently pursued based on long-term vision rather than short-term popularity. Inclusive growth is not achieved overnight but requires continuous effort and investment.
Ultimately, the success of this policy will be an important test of whether Korea can overcome the structural problems of deepening inequality and polarization and move toward an inclusive society where all citizens enjoy the benefits of economic growth. When government will is supported by citizens' interest and participation, true 'growth that everyone enjoys' will be possible.
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