Welfare Entry and Exit during Economic Recession: Impact on Private Education Service Use in South Korea

Concerns about educational inequality have increased as the usage of Private Education Services (PES), which is greatly influenced by parents' income, has increased. If the fair competition is not ensured, education can serve to reinforce the intergenerational persistence of class stratification, rather than work as a tool to break it. To deal with this problem, governments in global societies have provided cash transfers or in-kind benefits such as education services for children of low-income families. Researchers have analyzed the effect of the welfare benefits on the educational outcomes of recipient families. However, there are few studies on how welfare program participation affects the educational choice of recipient families.

This study investigated the impact of the 2007 reform of the National Basic Livelihood Security System (NBLSS) South Korea’s primary public assistance program, which encouraged work and expanded the scope to the near-poverty group, on changes in the usage of PES, and offers insights into how the 2007 NBLSS reform impacted the families as the 2008 financial crisis unfolded.

For those, the year 2006 (pre-NBLSS reform and pre-financial crisis), 2007 (NBLSS reform, pre-financial crisis), and 2008 (NBLSS reform, post-financial crisis) Korea Welfare Panel Survey (KOWEPS) data and the Ordinary Least Squares (OLS) analysis are employed. The usage of PES is comprised of six dependent variables: 1) the type of PES -- private educational institutions, private lessons, private lessons with study books, an after-school program in school, 2) the number of PES, and 3) the average monthly expenditure for PES. Samples were classified into four groups: enterers, low-income non-recipients, exiters, and continuers. Two treatment variables were created: NBLSS entry, using enterers (NBLSS entry = 1) and low-income non-recipients (NBLSS entry = 0); and NBLSS exit, suing exiters (NBLSS exit = 1) and continuers (NBLSS exit = 0).

We found that the NBLSS entry increases the usage of almost all PES, especially for private lessons (+0.327 unit, p<0.001), after-school programs in school (+0.299 unit, p<0.001), and the number of PES (+0.521 unit, p<0.001), and that the NBLSS exit reduces the usage of almost all PES, especially for private lessons (-0.425 unit, p<0.01), after-school programs in school (-0.242 unit, p<0.01) and increases the usage of the private lessons with books (+0.448 unit, p<0.01). Overall, the NBLSS helps its recipients choose more and better PES. This result is significant in that it shows the only NBLSS recipient households reversed the trend of reducing educational expenditures during the financial crisis as compared to other households.

Several policy implications arise as a result of these findings. First, more cash and education in-kind benefits should be given to households with children so that the children can benefit from more and better PES services. Second, offering low-cost PES like programs in public settings can be a good solution to decrease educational inequality; in that case, the quality of after-school programs in school should be brought up to the level of those in private education settings.