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SOCIA

L POLICY

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INISTR

ATIO

NVolum

e 38 N

umber 5

Octob

er 2004

VOLUME 38 OCTOBER 2004 No. 5

ISSN 0144 5596

Kevin FarnsworthWelfare through Work

Peter GraefePersonal Services in the Post-industrial Economy

Graham P. Martin, Kay Phelps and Savita KatbamnaHuman Motivation and Professional Practice

Fay WrightOlder People and Fuel Poverty

Aurel CroissantChanging Welfare Regimes in East and Southeast Asia

Margaret Harris, Ben Cairns and Romayne HutchinsonEnglish Regionalization and Voluntary and

Community Organizations

Reviews

spol_v38_i5_ofbcover 8/17/04 12:47 PM Page 1

© Blackwell Publishing Ltd.

,

Garsington Road, Oxford OX

DQ , UK and

Main Street, Malden, MA

, USA

S

P

& A

0144–5596V

. 38, No. 5, O

2004,

. 504–524

lackwell Publishing, Ltd.Oxford, UKSPOLSocial Policy & Administration

-


Original ArticleTitle

Title

Changing Welfare Regimes in East and Southeast Asia: Crisis, Change and Challenge

Aurel Croissant

Abstract

The Asia-Pacific region is a latecomer to the development of the welfare state. However, insome countries, governments have implemented ambitious programmes to extend social securitysystems and to enlarge the institutional structure of their welfare states. Comparative study ofthe welfare systems in East and Southeast Asia is, however, underdeveloped and there still isa relative lack of accurate knowledge about welfare systems in the region. Since the Asianfinancial crisis, more attention has been paid to the social policies of the countries. This paperexamines features of welfare regimes in Indonesia, Malaysia, the Philippines, Singapore, SouthKorea, Taiwan and Thailand, and undertakes a systematic review of the development, levelsand patterns of welfare regimes in the region. Two core questions are answered: can the existingwelfare systems help mitigate the social impact of the financial and economic crisis? What arethe needs, challenges and developmental perspectives that inform the future of welfare regimes inthis region?

Keywords

Southeast Asia; Welfare regimes; Convergence; Crisis

Introduction

Comparative studies of the welfare systems of East and Southeast Asia havebeen undertaken by Western researchers and, even earlier, by Asian scholars.It is still, however, an underdeveloped research field. This is surprising. Highrates of economic growth and significant improvements in living standardsthat have been achieved in many Asian countries have focused attention oneconomic and social developments in Asia. After the

–

Asian financialcrisis, however, greater attention has been paid to the social policies of thecountries in the region. Can the existing welfare systems help to mitigate thesocial impact of the financial and economic crisis? Or has the social fallout,

Address for correspondence:

Dr Aurel Croissant, Institut für Politische Wissenschaft,Ruprecht-Karls-Universität Heidelberg, Marstallsstrasse

, D-

Heidelberg, Germany. Email:[email protected]


which has taken place following the crisis, led to a “New Social Contract”(Haggard

:

)?This paper examines features of welfare regimes in seven countries which

are still struggling with the problems of the Asian economic crisis, manifest-ing itself in declining economic growth, rising unemployment, and fallingreal wages. The countries are Indonesia, Malaysia, the Philippines, Singa-pore, South Korea, Taiwan and Thailand. The paper proceeds as follows.First, it discusses three comparative perspectives of Asian welfare systems.Second, it undertakes a systematic review of the development, levels andpatterns of government spending on social policy in the region. The thirdsection provides a brief overview of the structures and efficacy of formalsocial security systems in the region, followed by a discussion of the welfareoutcomes in the fourth section. Lastly, we summarize the overall impact ofthe Asian financial crisis on the welfare regimes and consider future chal-lenges and developmental perspectives required for restructuring welfareregimes in the region.

Comparative Welfare State Analysis in East and Southeast Asia

Systematic research on the emerging welfare systems of this region canbe summarized in terms of three approaches. The

orientalistic

or

cultural

approach stresses the framing of social policy by a supposed or real Confu-cian welfare culture. Low levels of government investment in social policy,underdeveloped formal systems of social security and the fundamentalimportance of the family and community-based social safety nets are explainedas the consequences of a culturally bounded view of state and society, basedon the continuous relevance of Confucian social ethics. Culture thus providesthe foundations for a model of the family-based, so-called “Oikonomic” or“Confucian Welfare State” ( Jones

,

). Comparative welfare has shownthat cultural values and traditions do in fact shape the structures of nationalwelfare systems even in Western countries, particularly so in the early phasesof emerging welfare systems. However, many scholars note the numerousmethodological, empirical and theoretical problems of cultural explanationsfor different institutional structures, profiles and outcomes of the welfaresystems (White and Goodman

:

–

). While culture is an importantvariable for explaining the divergent paths of welfare development in manyparts of the world, not least in Asia, an approach that focuses on Confucian-ism seems inappropriate for the comparison of welfare systems in culturalsettings that are predominantly Muslim (Malaysia, Indonesia), Confucian(Korea, Taiwan, Singapore), Buddhist (Thailand) or Catholic (the Philippines).

A second approach stresses the public management of social risks as onecomponent of a broader strategy of state-led economic development in Asia.Welfare systems analysis is here primarily the analysis of public social poli-cies. Social policy is seen as one of several instruments of developmentalpolicy. Terms like “Productivist Welfare Capitalism” (Holliday

) or“Developmental Welfare Systems” (White and Goodman

) point to thestrategic use of social policies as a means of state-led industrialization in the


region. Low levels of taxation and social expenditure, small public welfarebureaucracies and governmental hostility to the idea of the redistributiveaspect of the welfare state in the West are the main features of a system thatrests primarily on three welfare columns: the company, the family and thecommunity (Chan

:

). Even though this approach correctly identifiesthe core attributes as well as the political logic of the development of somewelfare systems in this region, it cannot be applied to all Asian welfaresystems. Developmental strategies in this region differ quite substantiallyfrom each other; there is neither a uniform Northeast and Southeast Asianmodel of state-led development nor thus any universal or homogeneous“Asian welfare model” (MacIntyre

; White and Goodman

:

).A third approach focuses on the institutional traits, political structures

and social outcomes of national welfare

regimes

. This approach was predomi-nantly influenced by the works of Gøsta Esping-Andersen (

,

). As iswell known, he identifies three ideal

Worlds of Welfare Capitalism

: one liberal,one conservative-corporatist, and one social democratic world. Each welfareregime is characterized by specific patterns of state, market and familywelfare and different welfare outcomes, depending on the degree to whichlabour is decommodified and individuals are shielded from social risks in themarket (Esping-Andersen

: chs

–

). Esping-Andersen’s welfare regimeparadigm has attracted several critiques. Perhaps the most powerful is thatin concentrating on public social policy, his welfare regime approach ignoresother familial mechanisms of welfare production in a given country (Siegel

: ch.

). This critique is especially relevant for comparative welfaresystems analysis in Asia. Many scholars have pointed out the outstandingimportance of the family as a producer of welfare outcomes in the pre-commodified societies of this region. Consequently, they focus on the patternsof interaction between the public sector, the private sector and the households,and their contributions to the way in which welfare is produced (Gough

). By adding the third dimension “family” to the former bipolar axisof state and market, Esping-Andersen later corrected this shortcoming ofhis paradigm (Esping-Andersen

:

–

). This permits the beginning ofmeasurement of those largely non-monetary private, familial social serviceswhich are important sources of welfare production in “familialistic” welfareregimes. The introduction of a welfare triad of state, market and familygenerates a more adequate starting point for the comparative analysis ofAsian welfare systems.

Public Social Expenditure

In this paper social expenditure encompasses spending on social security,health, education and housing, and personal social services. As is oftenpointed out, aggregate government social expenditures in Asia are generallylower than in non-Asian countries, particularly inside the OECD. Comparedwith the rest of the world, core programmes of the modern welfare state areunderdeveloped in East and Southeast Asia. In the late

s, public socialspending as a percentage of GDP ranged between

.

in Indonesia and

.

in Taiwan.


Figure

shows, however, that the general finding needs some further dif-ferentiation. There was an increase in six of seven countries from the

sto the late

s. The increase was especially high in Korea, Thailand andTaiwan in the

s. Only one country (Malaysia) shows a substantialdecline within this period. Government social spending is relatively high inTaiwan and Malaysia and particularly low in Indonesia and the Philippines.Other countries lie in between, but close to each other.

It is also illuminating to focus on patterns of government social spendingand the substantial changes and differences among areas of spending. Table

reveals the priorities and trends in government expenditure on several keybudget items. In the case of social security and welfare spending as a pro-portion of total central government expenditure, the available data illustratethat the highest shares are found in Taiwan and Korea, whereas governmentsin the other countries spent considerably less on these heads. There was amarked increase in Korea and Taiwan in the

s, but the other countrieshave not shown any substantial changes within the last three decades.

Governments in Southeast Asia (except Indonesia) spend substantiallymore on health than in East Asia. With the exception of Singapore, spendingon public housing plays only a very limited role. Most countries spend moremoney on education than on any other item, and in Singapore and Thailandthe share was particularly high in the

s. On first glance, Taiwan deviatesfrom the regional trend because of her relatively low spending on education.However, the statistics provided by the International Monetary Fund (IMF)and the Asian Development Bank (ADB) do not include local governmentexpenditures. In Taiwan, however, local government accounts for abouttwo-thirds of all public expenditure on education. This leads to distortionstowards national statistics. By taking into consideration public expendituresby all administrative levels, as published by the Taiwanese Directorate-General of Budget, Accounting and Statistics, the share of education as apercentage of total public expenditures was

.

in

, while the share of

Figure

Public social expenditure (percentage of GDP)

Sources: Ramesh (: table .) (Indonesia, Malaysia Philippines, Singapore, Thailand, –); Directorate-General of Budget, Accounting and Statistics [accessed April ], <http://www.dgbas.gov.tw/dgbas/> (Taiwan); author’s calculation based on data from Asian Development Bank, Key Indicators, various years (others).


Table

Social expenditures as percentage of total central government expenditure

– –a –b

IndonesiaHealth . . .Social security and welfare n.a. n.a. n.a.Housing . . .Education . . .Total . . .

MalaysiaHealth . . .Social security and welfare . . .Housing . . .Education . . .Total . . .

PhilippinesHealth . . .Social security and welfare . . .Housing . . .Education . . .Total . . .

SingaporeHealth . . .Social security and welfare . . .Housing . . .Education . . .Total . . .

South KoreaHealth . . .Social security and welfare . . .Housing . . .Education . . .Total . . .

TaiwanHealth n.a. . .Social security and welfare n.a. . .Housing n.a. . .Education n.a. . .Total n.a. . .

ThailandHealth . . .Social security and welfare . . .Housing . . .Education . . .Total . . .

a Data for Taiwan cover the period – only.b Data for South Korea cover the period – only.Sources: Authors’ calculations based on data from IMF, various years (South Korea, Thailand, Philippines), and ADB, Key Indicators, various years (Indonesia, Malaysia, Singapore, Taiwan).


social security and welfare was . per cent ().1 Though nationalstatistics generally provide a finer-grained analysis, the non-comparability ofnational sources can make cross-national comparison based on them almostimpossible. Thus, this paper relies mainly on international data sources. Wehave compared national data sets with figures from the ADB and the IMF;the rankings of different areas of expenditure are not significantly affected.In the case of Taiwan, for example, even using national data confirms thatspending on social security and welfare is higher than on education.

To sum up: using aggregate public social expenditure data as a measureof the relevance and role of the state as a welfare provider shows that Asiais much more reluctant to spend money on social policies than Westerngovernments. It is evident that Asian governments set their fiscal prioritiesdifferently to governments in the West. In most OECD countries the relativeshare of social security expenditures is more than ten times larger than thetotal public education expenditures (Schmidt forthcoming). In Asia, publicspending on education is two to five times larger than the social securityexpenditures in most countries. Furthermore, while Asian welfare states arerelatively much smaller, given their level of economic development, educa-tion expenditures are above average in non-Asian countries (cf. Boix ;Kamimura ).

Social Security Systems: Institutions and Efficacy

The findings presented in the last paragraph do not mean that Asiangovernments have not made significant efforts in the field of social welfare. Table shows that formal social security programmes have become institutionalizedin all countries. Even though the historical origins of these programmessometimes reach back into the early twentieth century, most of them wereintroduced after the Second World War. Moreover, in countries like Taiwan,Korea and Thailand there was a marked increase in the size and coverageof social security programmes in the s and s, coinciding with thetransition to democracy in those countries (Aspalter ; Croissant ).

It is notable that while all the countries have forms of old-age incomesecurity, and forms of protection for work injury and sickness, only threecountries have an unemployment insurance system and only two of them(Korea, Taiwan) have actually implemented their policies so far. Only inThailand are family and child allowances found. The Philippines, Thailand,South Korea and Taiwan provide forms of social insurance for public andprivate sector employees. The social security systems in these countries covermore social risks than their counterparts in the other countries. Malaysia andIndonesia have introduced a dual system of social security. Civil servants andpoliticians are covered by pension schemes and both countries use providentfunds for old-age income security for private sector employees. Singaporerelies almost exclusively on a system of provident funds.

In all these countries, security programmes for public sector employees,civil servants, members of the armed forces and politicians are financedthrough government subsidies. Except in Singapore, these programmes pro-vide highly generous benefits compared to those available for employees in


the private sector. Beyond that, the role of governments is mainly restrictedto the monitoring and regulation of social insurance arrangements within theprivate sector. Government subsidies are extremely limited: statutory work-related social protection (unemployment benefits, disability payments and

Table

Origins, expansion and types of social security programmes

Country Work injury Sickness Old age Unemployment Family allowance

IndonesiaIntroduced No NoCurrent law Type SI SI PF/SI

MalaysiaIntroduced No NoCurrent law Type SI PF PF

PhilippinesIntroduced No NoCurrent law Type SI SI SI

SingaporeIntroduced No NoCurrent law Type EL/CI EL/PF/SA PF

South KoreaIntroduced NoCurrent law Type SI SI SI SI

ThailandIntroduced Current law Not impl. Type CI SI SI SI SI

TaiwanIntroduced NoCurrent law Type SI SI SI SI

Note:EL: Employer liabilityCI: Compulsory insurance with public carrierSA: Social assistanceSI: Social insurancePF: Provident fundSource: United States Social Security Administration; Croissant (forthcoming, table ).


pensions) are supported almost entirely by payments from employers andworkers (see table ). Compared to other countries in the Asia-Pacific region,private social security schemes in Singapore and Malaysia have high contri-bution rates, whereas rates of contribution are relatively low in Indonesia,Thailand, the Philippines and Taiwan. Social security programmes in Koreainvolve relatively high payments by employees and below-average contribu-tions from employers.

Public sector schemes in the region generally cover all those in the definedcategories, usually public sector employees. Large coverage gaps exist, however,in the private sector. Exceptions are Singapore, which can be characterizedas a country with a high degree of coverage, and South Korea and Taiwan,which have reached almost universal coverage in the case of their nationalhealth insurance schemes. More generally, Korea, Taiwan and Malaysia pro-vide medium levels of coverage in international terms, while the degree ofcoverage in the other countries is rather low. During the s, however, theintroduction of new social security schemes, and the expansion of existingprogrammes in some countries (Thailand, Korea, Taiwan) has led to a con-siderable increase of coverage in the private sector. The data suggest a corre-lation between the size of the informal sector and the degree of social securitycoverage. In the last decades Singapore, Malaysia, South Korea and Taiwanhave achieved fast rates of formal sector employment growth, while in othercountries the majority of the national labour force still works in the informalsector, and are not covered by formal social security systems. Furthermore,the countries with the greatest informal sector employment lack comprehen-sive and coherent strategies for extending social security (see table ).

Table

Contribution rates for social security programmes (percentage, )

Country Old age All social security programmesa

Insured Employer Total Insured Employer Total

Indonesiab . . . . .c .Malaysia . . . . . .Philippinesb . . . . . .Singaporeb .d .d .d . .c .South Korea . . . . . .Taiwanb . . . . . .Thailandb .d .d .d . . .

Note:a Old age, work injury, sickness, unemployment, family allowance.b Contributions are subject to an upper earnings limit for some benefits.c Employers pay the total cost of work injury benefit.d Also includes the contribution rate for other programmes.Source: See table .


Outcomes

Until the late s, public pension systems, unemployment benefits, sickness-related payments and public health care remained limited in this region.This left the burden of social security outside the state and within the market,the family and charitable organizations. This was especially true for incomesecurity in old age. While public servants received generous pension benefits,private sector employees not covered by the company pension schemes oflarge enterprises received very low benefits. Provident funds and compulsorysavings schemes within the private sector were generally too weak to protectagainst the risks of inflation and growing life expectancy. Furthermore, theseprogrammes often do not provide for survivors’ benefits.

A widespread use of contributory pension schemes occurs only in thePhilippines, Korea and Thailand, and in Taiwan for some occupationalgroups. A national pension scheme in Taiwan has been planned for manyyears, but it has not yet been realized. To supplement private sources ofsupport for the elderly, the government in Korea established a NationalPension Scheme in . In Thailand, a pension programme was includedin the Social Security Act of . However, these programmes will not beginpaying regular pensions until and , respectively. The public socialsecurity system in the Philippines has a number of weaknesses, among whichare high administrative expenditures, low efficacy, insufficient contributionsfrom both the insured and employers, and erratic changes to levels ofbenefits and services. Contrary to the convention, enterprise-based welfare

Table

Coverage by important social security programmes in the private sector ()

Country Proportion of people eligible to benefits, either as a percentage of the total population

(national health insurances), or as a percentage of the labour force (other schemes)

Indonesia (PT Jamsosetk) n/aMalaysia (Employees Provident Fund) .Philippines (Social Security System) .Singapore (Central Provident Fund) .South Korea

National Pension Plan .National Health Insurance .

TaiwanLabour Insurance .National Health Insurance .

Thailand (Social Security Organization) .

Source: Asher (: ); Croissant (forthcoming, figures and ).


is important for income replacement for the elderly only in Korea, and verymarginal in other countries. Even in Korea, however, employment-basedwelfare is not distributed evenly across the population but concentrated oncore workers in large enterprises. In the other countries, occupational struc-tures are very different. They overwhelmingly involve small, family-orientedor medium-sized companies. Hence the labour market is flexible and com-petitive, but involves low loyalty and commitment from both employees andemployers. Instead, family loyalty, as opposed to company loyalty, providesthe foundation for social protection ( Jacobs ). Moreover, in Korea, wherethe average job tenure was . years in the mid-s (as opposed to .years in Japan and . years in the United States), enterprise pensions aremore often a severance pay than a genuine pension (OECD b).

Thus, even workers covered by enterprise-based welfare, that is, mostworkers in the informal sector or in small and medium-sized enterprises, faceconsiderable income insecurity when they reach retirement age. Hence,earnings from continuing work or support from children are the main sourceof income for most older people. Income transfers within the family were themain income source for . per cent of older people in Korea in andfor . per cent in Taiwan (). In other countries, the vast majority ofolder people also receive their main income from intra-family transfers. Bycontrast, public pensions, public assistance and private insurance are themain sources of income for a negligible proportion of older people (Kwonb: ; Ku : ; Gough ). Furthermore, a weakly developedpublic infrastructure of personal social services, maternal and child welfareinstitutions, nursing homes and other welfare institutions for the aged, evenin the most developed economies (for example, Singapore, South Korea andTaiwan), together with the high level of intergenerational co-residence, meanthat the main burden of support and care for dependants, especially theaged, is borne by the family (see table ).

The model of the extended nuclear family, in which most older peoplewith their families and working incomes are pooled into household income,generates income security, provides alternatives to public personal socialservices, and keeps private social expenditure at low levels (see table ).However, it also sustains the exclusion of women from the labour market, asis demonstrated by low female employment rates (except in Thailand; seeGough : ; and table , below).

The importance of the family compared with the state is also displayed ineducation and health care. Even though public expenditures on educationand health are substantial, levels of private spending remain high. For ex-ample, in private expenditure as a share of total expenditures on educationwas . per cent in South Korea, . per cent in Thailand, and . percent in the Philippines (OECD a). While at the basic levels educationdelivery is mostly public, the majority of college and university students inSouth Korea, Indonesia and the Philippines are enrolled in private institu-tions. In Thailand, public universities dominate the field, but there is a trendtowards increasing private enrolment. In Singapore, about one-third of allstudents at the primary and secondary levels are enrolled in private schools.Private consumption of health is also significant, due to high out-of-pocket


payments, low spending or low generosity of public health schemes. In mostcountries, basic health care is either free or provided for a low user chargeonly for those on very low incomes, the rural poor, and some ethnic minor-ities (see table ).

According to the terminology of Esping-Andersen, the welfare regimes ofEast and Southeast Asia are essentially “familialistic”, assigning most welfare

Table

Institutions for older and disabled people

Year-end Caring and nursing institutions for the aged

Institutions for handicapped

Korea Taiwan Korea Taiwan

Units Inmates Units Inmates Units Inmates Units Inmatesa

, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

a Inmates before , and inmates and day-care persons after .Source: Korea Statistical Yearbook, various years; DGBAS [accessed August ], <http://www.dgbas.gov.tw/dgbas/bs/chy/table/s.xls>.

Table

Percentage of older people ( and over) living in three-or-more generation households

Indonesia Philippines Singapore South Korea Taiwan Thailanda

.

a + years old.Source: DGBAS, Population and Housing Census in Taiwan-Fukien Area [accessed October ], <http://www.dgbas.gov.tw/census∼n/six/line/tabl_ch.htm> Kwon (b); Knodel and Nibhon (); Knodel and Nibhon ().


functions to the household. The key to social security is lifelong inclusion inthe labour market. This supports family and household provision of securityagainst social risks through intergenerational and intragenerational incomepooling and transfers of personal income. The family also provides mostpersonal social services. Social entitlements are minimal, even though insome countries the written constitution commits the state to the enhance-ment of the social welfare of its citizens.

Formal social security schemes target wage- and salary-earners in theformal labour market. Welfare outcomes depend on the male breadwinnermodel, household welfare production by women and low female labour forceparticipation rates. Unlike the conservative-familialistic welfare regimes ofSouthern Europe, familialistic welfare regimes in Asia do not produce highdecommodification for male breadwinners through generous social benefitsand government regulation of the labour market (Esping-Andersen :–). Significant welfare guarantees for the family through entitlementsto government transfers are absent. This results in a low degree of decom-modification and defamilialization. Due to the high degree of employmentin the informal sector, Indonesia, Thailand, and the Philippines might evenbe characterized as “precommodified societies”.

Income redistribution has rarely been an issue in capitalist East andSoutheast Asia. The redistributive impact of Asian welfare states is weak.Inequalities in personal and household incomes produced by the market andsocial structures are reproduced by state welfare. Thus, it is not surprisingthat in most of the countries, Gini coefficients of income distribution arerelatively high, compared to countries in the West. Nonetheless, incomeinequality in these seven selected Asian countries is moderate, and even lowcompared to non-Asian countries outside the OECD, despite the lack of

Table

Private and public expenditures on health

Country Total expenditures (%) Pro Kopf (PPP, US$)

Public Private Public OOPSa Total

Indonesia . . . . Malaysia . . . . Philippines . . . . Singapore . . . . South Korea . . . . Thailand . . . .

a OOPS: out-of-pocket spending.Source: WHO (: –); WHO (: annex table ).


redistributional social and fiscal policies. As is emphasized by Kwon (a),Jacobs () and Chan (), the key to the performance of Korea, Taiwanand other countries in the region in terms of income equality lies outsideof the realm of state welfare. Rather, increasing participation in the work-force by men, and by women before marriage, strong family support, highlevels of private transfers between generations and from urban workersto rural households provide the explanation for relative equality ( Jacobs: ).

It is important, however, to stress that these “familialistic” welfare regimes,notwithstanding their residualism and the government’s hostility to the ideaof social citizenship rights and redistributive welfare policies, achieve highlevels of “human development”. As the Human Development Indicator(HDI) and other social indicators reveal, Asian countries have demonstratedimpressive improvements in social well-being over the last three decades.There have been falls in poverty levels, rising levels of educational attain-ment, improved health, and growing life expectancy (see table ).

It is important to notice, however, that there still are substantial genderinequalites and regional disparities. These problems are based on closedsocial stratification, regional concentration of work and income opportuni-ties, the political marginalization of some social groups and cultural obstaclesto female emancipation (Ninami et al. ; Merkel ). The figures avail-able indicate manifold discrimination in women’s access to education, health,social security and personal income.

The Asian Financial Crisis

Prior to the economic crisis of the late s, most countries in East andSoutheast Asia had enjoyed a long period of economic growth. This madepossible a substantial mitigation of poverty and brought broad improvementsin the quality of life in most countries. The Asian financial crisis broughtthese patterns to an abrupt halt. The social fallout was worst in South Korea,Thailand, and Indonesia, while Taiwan and the Philippines were largelyunaffected at first. The effects hit Taiwan only later and more weakly. In thePhilippines the crisis ruled out economic and social recovery from twodecades of economic and social decay (Reyes et al. ) (see table ).

All the countries under review recorded sharp falls in their GDP per capitagrowth rates, rising unemployment and reductions in workers’ incomes.Indonesia, Malaysia, the Philippines and Thailand also experienced highrates of inflation. Millions of workers (especially women) in the region losttheir jobs, many responded to un- or underemployment by moving to ruralareas and engaging temporarily in agricultural labour. Consumer priceinflation eroded purchasing power and savings. Firms in the formal sectoroften responded to the crisis by cutting or freezing wages, leading to substan-tial falls in real incomes: between and , real earnings of workers inThailand, Indonesia and Malaysia were reduced by , and per cent,respectively (Reyes et al. : ). All the countries except Singapore experi-enced a slight increase in income inequality and the incidence of poverty(World Bank ; ESCAP ).


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Individuals, families and the government reacted to rising unemploymentand decreasing incomes with various strategies. In countries with a largeinformal or agricultural labour sector, the return of labour to rural areas andagriculture was substantial. The poor responded by searching for alternativead hoc job and income opportunities. Some countries, such as Indonesia andthe Philippines, sought to increase the export of migrant workers, while othercountries, like Singapore and Malaysia, attempted to repatriate migrantworkers. Households adapted by altering their consumption and saving pat-terns, leading to falls in the private consumption of health and education anda temporary decline of private savings rates (ADB , : table A;World Bank : ; Chan : –).

Research has shown that the costs of the crisis were not distributed equally.The lack of an adequate social safety net in Indonesia and Thailand haddisastrous consequences for groups with lower incomes. The poor, badly

Table

Growth, unemployment and inflation (%, –)

Indonesia Malaysia Philippines Singapore S. Korea Taiwan Thailand

Growtha

. . . . . . . . . . . . . −. −. −. −. −. −. . −. −. . . . . . . . . . . . . . . −. . −. . −. . . . . . . . .

Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inflation . . . . . . . . . . . . . . . . . −. . . . . . . . . . . . . . . . . . . . . . . . . . . . −. . −. .

a Growth rate of GDP per capita.Source: ADB, Asian Development Outlook (various years).


educated, least experienced, young, and female workers suffered the most.They were the most likely to fall into long-term unemployment and oftenremained poor even after the economy began to recover (Lee and Rhee ).Asian governments responded in various ways to an emerging social crisis.Three strategies can be differentiated: adopting specific employment policies(strengthening of employment services, initiating training and retrainingprogrammes for the unmployed, and introducing public work programmes;expanding social security programmes; providing extended financial assist-ance to the poor, elderly and families with many children (Chan : ;Adam et al. ).

Two groups can be differentiated in terms of government responses. Thefirst consists of Singapore, Malaysia, Indonesia and the Philippines. Thegovernments in these countries believed that the restoration of economicgrowth and traditional values of self-reliance and mutual support were thebest way to solve the social crisis. They sought to strengthen establishedpatterns of welfare residualism, and relied on familialism, communitarianismand traditional norms of subsidiarity and mutual support.

The second group consists of South Korea, Taiwan and, to some degree,Thailand. Democratic progress in these countries was already creatingpressures for greater attention to social policy, and the economic crisis of– has accelerated these trends. The transition to democracy in the lates or early s had created a new political environment and raised thepolitical costs for neglecting public demands for greater government socialspending. In these three countries, all major parties discovered social policyas an important issue for mobilizing electoral support (Kwon : ; Tang: –; Chen ; Schramm ; Kim ). The crisis of –reinforced this trend. Political parties and election candidates withoutcredible social policy agendas risked defeat, as Pasuk and Baker (: )demonstrate in Thailand. Agenda-setting by NGOs, academics and socialorganizations combined with greater awareness of the harmful social impactsof the financial crisis forced governments to launch new social welfare pro-grammes and to extend the existing schemes (Naruemon : –). Thegovernments in all three countries passed legislation to strengthen their socialsecurity systems (Lin ; Croissant ; Kim ).

Understandings of the Need for Reform

Economic recovery has begun in some countries in East and SoutheastAsia. However, the era of fast, even storming economic growth is gone, prob-ably forever. Most countries are struggling with declining economic growth,higher unemployment rates and an emerging problem of long-term un-employment. The Asian financial crisis has irreversibly and irrecoverablychanged the parameters for economic development and public social policyin the region. Whatever the successes and failures of adjustments and socialsafety-net programmes in the short run, the crisis revealed the weaknessesand shortcomings of the existing welfare systems in East and SoutheastAsia. Therefore, the more interesting question is what the longer-term futureof social policy might be. The immediate social fallout of the crisis has


substantial implications for the future development of welfare regimes andwelfare systems in the region. The idea that East Asian welfare systems are“cheaper” than a European-style welfare state, especially popular amongapologists for the “Oriental welfare model”, proved to be an illusion. Beforethe crisis this view might have been correct in terms of a purely monetaryassessment of government spending, but only by excluding the high mone-tary and non-monetary costs of welfare for the family, households and indi-viduals, especially women and older people. These welfare regimes had reliedon optimistic assumptions of decade-long high economic growth rates, anda high and lifelong male labour market participation. In times of prosperity,Asian governments could maintain public unemployment, health, pensionand social service systems at low levels. These had clearly failed under thepressure of economic crisis.

In many Asian countries, social change has produced a higher demand forsocial policy. The stability of traditional family structures and a continuouslyyoung population have formed the basic social parameters for the welfaresystems in Asia. But now the more developed nations are facing the problemsof an ageing society, demand for the care of older people, declining fertilityrates and population growth, slowed growth of the labour force, with increas-ing female participation rates (see table ).

These developments, together with increasing urbanization, the rise ofpost-materialist, individualistic life conceptions, the increasing frequencyof one-generation or single-person households, and growing divorce rates,weaken the stability and integrity of the “familialistic” foundations of thewelfare regimes (Asher : ). It would be an exaggeration to suggest thatthe familialistic welfare regime in Asia is collapsing. However, the ability ofthe family (especially of women) to offer social security and social servicesmay not be maintained, leading to growing dependency on formal systems.

In some of the countries, democratization is creating new state–citizenrelations, providing greater opportunities for the articulation of demand forimproved welfare policies, and thus creating stronger incentives for politicalactors to pay attention to social policy. Moreover, the increasing inclusion ofthe East Asian economies into the global markets, and their vulnerability toglobalization further limit the opportunities of “enterprise-based welfare” aswell as the corporatist control of labour markets. This suggests that regulativewelfare state policies will lose effectiveness. Large enterprises may reducetheir roles as welfare providers, leading in turn to further demands on thestate.

Thus demographic, economic and political trends challenge the estab-lished structures of the welfare regimes in Asia. Since no actors other thanthe state will be able to fill the gaps in the welfare system, an increasing rolefor the state is likely. This is especially true for Korea, Taiwan and Thailand,where the populations are ageing, the pension systems maturing, and socialinsurance systems have already been extended.

Thus, it is not surprising that the discussion of an “Asian model” as analternative to the “Western-style” welfare state is losing much of its attrac-tiveness. In some Asian countries, the debate about reform of the welfaresystem is already increasingly shaped by European models. Political elites


and social activists seek answers for the social problems of their countries inthe experiences of the European and Anglo-American welfare regimes. Nolonger does the liberal model of the American marginal welfare state domi-nate these debates. Particularly for health and pensions, European models ofthe “conservative welfare state” are influential. There is growing discussionof universal, contribution-funded pension and health insurance systems, ofuniversal unemployment insurance in Taiwan and South Korea, as well asof a tax-financed, British national health service model in Thailand. These

Table

Demographic and other social trend indicators

Indonesia Malaysia Philippines Singapore Korea Taiwan Thailand

Elderly dependency rate . . . . . .a . . . . . . . . . . . . . n.a. .

% of population + years . . . . . .b . . . . . . . . . . . . . n.a. .

Total fertility rate– . . . . . . .– . . . . n.a. n.a. .

Average growth of population per year– . . . . . .c .– . . . . . n.a. .

Life expectancy at birth– . . . . . .d .

Labour force participation rate (women) . . . . . .a . . . . . . . .

Average growth of labour force– . . . . . .e .– . . . . n.a. n.a. .

Note:a .b .c –.d .e –.Source: DGBAS, Population and Housing Census in Taiwan-Fukien Area, http://www.dgbas.gov.tw/census∼n/six/line/tabl_ch.htm; DGBAS, National Statistics, http://www.dgbas.gov.tw; UNDP, Human Development Report ; ILO (); ILO (); Asher (: ).


new conceptions of welfare systems mean nothing less than a departure fromthe Asianness of welfare towards a more reflective learning from Westernexperience. Thus, at least in South Korea, Taiwan and Thailand, the adop-tion of Western models, which come in a large variety of forms, is now morelikely than the preservation of the existing welfare models.

Note. Ministry of Education of the Republic of China, Education Expenditure (accessed

September ), at http://.../statistics/user/c.xls; DGBAS, SocialIndicators (accessed September ), at http://www.dgbas.gov.tw/dgbas/bs/chy/table/s.xls. Ministry of Education and Human Resource Devel-opment, http://www.demoe.go.kr/English/PDF/EducationInKorea. NationalStatistical Office, http://www.nso.go.th/syb2001; Department of Education, http://www.deped.gov.ph (all accessed August ); Ramesh (: –).

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