A Study on the Causes of Changes in Income Distribution and the Effect of Income Security for Persons with Disabilities

Abstract

This study was prompted by the recent stagnation in poverty reduction among persons with disabilities after rapid improvement in the first half of the 2010s. The study aims to identify the reasons for such shift in the income distribution for persons with disabilities and to test the effectiveness of income security systems. The research focuses on three specific topics: First, we analyze the poverty trends among persons with disabilities and the impact of changes in the composition of the disabled population on poverty. Second, impact analysis is done on poverty of different categories of public transfer income. Third, we test the impact of reforms for re-targeting the disability benefits. The disposable income poverty rate for persons with disabilities decreased from 47.0% to 43.0% from 2012 to 2016 and from 40.7% to 39.6% from 2016 to 2020. Despite the continued expansion of public transfers in the 2010s, the disposable income poverty rate for persons with disabilities has not decreased significantly in recent years because the market income poverty rate for persons with disabilities has increased significantly. The reweighting analysis also shows that changes in the population and household structure of persons with disabilities have significantly increased the market income poverty rate for persons with disabilities. If their demographic and household structure had not changed, the disposable income poverty rate would have decreased to 34.5% in 2020. The annual gross public transfer income of persons with disabilities increased significantly from KRW 3.05 million in 2012 to KRW 6.84 million in 2020, and the public transfer receipt rate increased to nearly 90%. In 2020, the poverty reduction effect of net transfer income on the poverty rate increased to 15.1% points. Analysis by category of transfer income shows that the public pensions play the greatest role in reducing their poverty rate. Disability benefits, on the other hand, did not have a significant poverty reduction effect. We simulated a hypothetical situation where a work capacity assessment is introduced for disability benefits in 2013. According to the analysis, the receipt rate of disability benefits more than tripled from 1.11% before the introduction of the work capacity assessment to 3.34% in 2020. On the other hand, if the disability benefit is limited to the registered disabled people, the receipt rate should be only about 2% in 2020. Based on the results of this study, we propose some policy measures to improve the income distribution of persons with disabilities: First, accessibility to the old-age income security system for persons with disabilities should be strengthened. Second, work capacity assessment should be introduced to disability benefits. Third, the basic disability pension should be structurally reorganized. Fourth, it is necessary to respond to the changes in the household structure of persons with disabilitie