In-kind welfare transfers cut Gini coefficient by 0.044, poverty rate by 4.8 percentage points

Government welfare benefits provided in kind — including free education, national health insurance and free childcare — averaged 9.26 million won ($6,540) per household annually. When factored into income, the relative poverty rate fell 4.8 percentage points from 15.3 percent to 10.5 percent, and the Gini coefficient improved from 0.325 to 0.281.

The Ministry of Statistics released the findings Tuesday in a report titled "Results of Income Statistics Incorporating Social In-Kind Transfers." Social in-kind transfer income per household averaged 9.26 million won in 2024, up 0.4 percent from the previous year — equivalent to 12.5 percent of the average household income of 74.27 million won that year. Adjusted household income including social in-kind transfers reached 83.53 million won, up 3.0 percent from the prior year.

Social in-kind transfers are welfare benefits that the government and other public bodies provide to households or individuals as products or services rather than cash. Representative examples include free education, free childcare and medical cost support through national health insurance. While money does not flow directly to households, the government covers costs that households would otherwise bear, preserving their real disposable income.

The relative impact of in-kind welfare was greater for lower-income households. The bottom income quintile — the lowest 20 percent of earners — received average annual social in-kind transfer income of 7.27 million won, equal to 46.8 percent of their household income of 15.52 million won. The top quintile received a larger absolute amount of 12.53 million won in transfers, but that was limited to 7.2 percent of their household income of 173.38 million won.

The composition of in-kind welfare also varied by income level. Among the bottom two quintiles, healthcare accounted for 88.0 percent and 67.1 percent of social in-kind transfer income, respectively. In the fourth and fifth quintiles, education made up 51.3 percent and 57.0 percent, respectively. Lower-income households relied more heavily on medical support such as national health insurance, while higher-income households drew proportionally more from education services.

By age group, households headed by people in their 40s — who face the heaviest child education costs — received the largest in-kind welfare benefits. Such households averaged 14.99 million won in social in-kind transfer income, outpacing those headed by people in their 50s at 9.74 million won, those 60 and older at 7.97 million won, and those 39 and under at 5.72 million won. The ratio of transfers to household income was also highest for the 40s group at 16.1 percent. Childcare dominated transfers for households headed by those in their 30s or younger, education for those in their 40s, and healthcare for those 60 and older.

Larger households received greater benefits. Annual social in-kind transfer income was 3.54 million won for single-person households, 6.73 million won for two-person households, 10.34 million won for three-person households, 19.14 million won for four-person households, and 30.19 million won for households of five or more. In households of four or more, education and childcare together accounted for more than 70 percent of total in-kind transfers.

Healthcare was the largest component of total social in-kind transfers. In 2024, healthcare-related in-kind transfers averaged 4.88 million won per household, making up 52.8 percent of the total. Education accounted for 3.77 million won, or 40.7 percent; childcare for 320,000 won, or 3.5 percent; and other vouchers for 280,000 won, or 3.0 percent. Healthcare and education combined reached 93.5 percent of all in-kind transfers. Compared with the previous year, healthcare transfers rose 3.5 percent, while education fell 3.4 percent and childcare dropped 7.2 percent.

Incorporating in-kind welfare into income significantly reduced measured inequality and poverty. The Gini coefficient based on equalized disposable income before social in-kind transfers stood at 0.325 in 2024, but fell to 0.281 on an adjusted disposable income basis that includes in-kind transfers — an improvement of 0.044. A Gini coefficient closer to zero indicates a more equal income distribution.

The income quintile ratio — which measures the gap between the top and bottom 20 percent of earners — narrowed from 5.78 times to 4.33 times, a reduction of 1.45 times. Social in-kind transfers supplemented the real income of lower-income households, helping to narrow the gap between income groups.

The poverty-reduction effect was also pronounced. The relative poverty rate before accounting for social in-kind transfers stood at 15.3 percent, falling to 10.5 percent after their inclusion — a drop of 4.8 percentage points. The poverty rate for the retirement-age population of 66 and older showed the sharpest improvement, falling 12.0 percentage points from 37.7 percent to 25.7 percent. The child poverty rate for those 17 and under dropped 7.8 percentage points from 9.5 percent to 1.7 percent, while the working-age poverty rate fell 2.2 percentage points from 10.3 percent to 8.1 percent.

The statistics are experimental figures, however, not officially approved national statistics.

Social in-kind transfers are not currently included in the OECD's official income statistics because policy content and valuation methods differ across countries. The Ministry of Statistics plans to gather user feedback through expert advisory meetings, review the validity and reliability of its methodology and findings, and then seek official national statistics approval.