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The National Assembly Futures Institute publishes reports that predict and analyze the changes in the future environment based on a comprehensive perspective, and derive mid- to long-term national development strategies in consideration of the preferences of the citizens
[20-04] A Study on the Fourth Industrial Revolution and Social Policy Financing: Focusing on Social Cost Estimation

Date : item : Research Report 20-04 P.I : Lee Chae-jeong et al.

In the era of the fourth industrial revolution, many predict that innovation caused by the development of artificial intelligence and robotics will replace not only human physical labor, but also a large share of knowledge labor. Accordingly, studies have been conducted that analyzed the size and aspects of job replacement caused by innovation stemming from the fourth industrial revolution. In fact, around us today we often see technology replacing everyday human tasks. For example, many restaurants have installed kiosks for ordering and payment, and self-driving cars have emerged.

The current social security system is designed under the premise of human labor. Tax and social insurance premiums are set based on earned income. A basic principle in determining whether a person needs to receive social assistance due to a low income is the question of whether or not he or she is unable to participate in the labor market based on socially accepted reasons such as sickness, disability, lack of ability to work, etc. If job replacement occurs due to technological innovation by the Fourth Industrial Revolution, jobs will be replaced by technology regardless of individual effort or will, and the principle of the social security system will be dismantled.

The study examines the manner in which job replacement caused by Fourth Industrial Revolution innovations affects the maintenance of the current social security system. We estimated the cost of increasing public assistance to the poor, which is increased by job replacement, and the cost of reducing labor income tax and social insurance premium income caused by job replacement. In other words, we estimate the social costs of job replacement caused by technological innovation. In addition, the relationship between the perception of individual households by economic conditions and the perception of reduced earned income by job replacement, and life satisfaction were analyzed, respectively. According to the analysis, poverty costs increase by 42 to 54 %, income tax revenue decreases by 45 to 57 %, and social insurance income decreases by 10 to 16 %. On the other hand, if the level of assets and income is low and households' economic status is perceived negatively, disposable income will also be greatly reduced due to job replacement. In addition, the subjective outlook for quality of life in five years is lower for households with large declines in disposable income due to job replacement, but higher asset levels do not significantly affect the outlook for quality of life. This suggests that the reduction in state revenue due to job replacement negatively affects the maintenance of the current social security system, and income polarization can be exacerbated by job losses and reduced wages.

This study is expected to contribute to specific and effective discussions on which kind of policy and legislative alternatives should be considered to prepare social security systems in the fourth industrial revolution to ease polarization of Korean society. Based on this study, Korean society needs to find ways to actively respond to changes in the labor market and minimize social shocks caused by innovation.