Questions/Answers

The growth of a social economy addresses various social problems (childcare, healthcare creating jobs for socially-vulnerable laborers, etc.) while simultaneously creating a local community. Seoul Metropolitan Government (SMG) is striving to create bonds among social constituents and strengthen the city’s sustainability through the creation of a social investment fund and provision of specialized support for social enterprises. Through such efforts, SMG will be able to contribute to the SDGs that aim to create “sustainable cities and communities.”

By providing support based on assessments of actually produced social values (financial support subsidies) for social enterprises, results related to the creation of jobs for socially vulnerable individuals during assessments of support projects are connected to investment/loan activities (contributions to local community, etc.). SMG is implementing a comprehensive support plan for the revitalization of the social economy that accommodates socially vulnerable groups, thereby enabling all social constituents to establish bonds of solidarity with one another. The creation of such policies is significantly contributing to the delivery of accommodating and balanced services.

“Social economy” is a concept that has emerged as a solution for diverse social problems (inequality, rich-poor divide, etc.) caused by urban development. It is a form of economic activity that prioritizes people over profit. Social enterprises located in Seoul create their basis for income generation by providing jobs to socially vulnerable individuals (people with disabilities, etc.). This contributes to a decrease in inequality, eradicating poverty, creating good-quality jobs, local economic growth, and the creation of sustainable cities and communities. SMG provides individually tailored support for social enterprises, and the socially vulnerable now make up 59% of their workforces..

In Korea, conglomerates (0.8% of all companies) produce 64% of total sales. This results in the aggravation of economic inequality and subsequent income polarization. ※ Korea’s Piketty index (national income level compared to total asset value) is 8.28, one of the highest in the world Income inequality is particularly rampant among seniors (age 65 and above) due to the increasing alienation of socially vulnerable individuals (including seniors) from the labor market. Senior care and housing are also each their own social problem. According to Seoul Survey 2015, the social economy was named as a factor that can potentially play a positive role in addressing social problems (alleviation of social polarization, revitalization of welfare projects, etc.). Accordingly, SMG attempted to secure a “way out” during crisis through a “social economy based on cooperation” in order to create jobs for labor-vulnerable groups and search for a new growth engine for the national economy.

SMG established the SMG Social Economy Support Center, local government social economy cluster and comprehensive support center, Youth Job Hub and Social Creative Lab so that those who are passionate about the social economy can be encouraged to further pursue its values. SMG has also designated and is operating 11 “social economy special districts” that develop business models to match the characteristics of the local population with relevant industries. SMG was the first institution in Korea to create a social investment fund to provide long-term, low-interest loans for social enterprise operational costs as well as social investment projects.

As an economy type that is based on cooperation and solidarity, the social economy prioritizes shared leadership with the private sector. In order to produce and implement a revitalization policy for Seoul’s social economy together with the agents of the social economy, the “Seoul Metropolitan Government Public-Private Policy Council” was held on the first Wednesday of each month for the policy’s brainstorming/design and implementation. This led to SMG being the first in Asia to conduct a “Social Outcome Guarantee Project.” SMG was also the first in Korea to create a social investment fund that is loaned out directly by the central government via long-term, low-interest loans to social enterprises.

SMG spearheaded the formation of the Global Social Economy Forum (GSEF) and has served for two consecutive years as its chair city as of 2018. It is also striving to strengthen international solidarity on related issues (e.g., participation in GSEF 3rd General Assembly). Through GSEF, SMG provides funding for social franchising to proliferate its outstanding social economy business model. The central government has benchmarked SMG’s social investment fund for its creation of a social innovation fund (ongoing). Other city governments in Korea are also benchmarking various aspects of SMG’s social economy (e.g. creation of Social Economy Support Center, fund creation, execution of Social Outcome Guarantee Project).

$198 million was invested between 2013 and 2018. Approximately 90 percent of SMG’s social economy sector budget went to personnel/business expenses of individual social enterprises (until 2011). After 2012, financial support fell from 89 to 48 percent. Despite Mayor Park Won-soon’s goal of reducing the total MSG budget by 10 percent annually since 2012, the number of social enterprises increased by almost four-fold during this period, creating $3.14 billion in accumulated sales and hiring a total of 15,800 individuals, achieving a high level of financial efficiency on par with an ROI (return on investment) of 15.3.

SMG is consistently engaged in efforts to secure the sustainability of the business environment for its social economy (establishment of social economy infrastructure, discovery and cultivation of social enterprises, expansion of market and sales routes, securing of social finances, strengthening of domestic/international ties). Various projects are currently underway, including the creation of Social Economy Special Zones in 10 districts ($ 550 thousand in support (total) over three years per zone), cultivation of outstanding social enterprises ($ 150 million in support per company), and an expansion of public procurement (goal: $ 200 million by 2022). SMG also has various plans for future projects, including modifying the support structure from an organization-based to a project-based type to individually tailor support and increase consigned (community) management of public assets.

Yes

According to the Seoul Institute’s June 2016 happiness index survey, each social enterprise created increased local residents’ happiness by 0.033. In monetary terms, the equivalent was estimated to be an increase of $ 9.4 million in total income for a district of 400,000 people. Also, the social performance index of social enterprises in Seoul (values produced by employment/social services compared to support amount) was 12.9 as of late 2015. This figure means that the amount of social value produced from the given support amount was at least 12.9 times larger than the support amount, showing that social enterprises also benefit the general population.

The Seoul Institute measured the effect of the social economic institution on the quality of life of residents, analyzing human relationships in terms of the variables “activities of social economic institutions” and “quality of life of local residents.” In other words, the analysis focused on how much residents’ quality of life changes in the case of increased activity by social economic institutions after excluding all other variables (income, age, education level, occupation, etc.). The Seoul Survey, which is conducted on 45,000 residents over age 15, was used as the basis for extracting a happiness variable. The number of social economic institutions was used as the activity variable for institutions.

Another characteristic of the outcome of the analysis is that the management/governance structure of social economic institutions is not only democratic toward the institution’s members but is open to local residents, with many social economic corporations sharing the outcomes of their corporate activities with local residents. Results showed that the density of the average social economic institution is low, while volunteer activities conducted by social economic institutions for local society can potentially increase levels of resident happiness.

SMG’s revitalization plan for the social economy is being created and implemented together with intermediary support organizations (on the metropolitan level) as well as on the local government level. Both private and public institutions participate in the Seoul Metropolitan Government Social Economy Public-Private Policy Council’s monthly meetings, which serve as a hub for negotiations regarding the revitalization of Seoul’s social economy. ※ Key members of the Seoul Metropolitan Government Social Economy Public-Private Policy Council ▶ Representatives of the social economy’s four major sectors: Seoul Council of Social Enterprise (co-CEOs), Association of Cooperatives in Seoul (secretary-general), Association of Rehabilitation Centers in Seoul (head of policy committee), Seoul Village Enterprise Association (co-CEOs) ▶ Heads of metropolitan/local government-based intermediary support centers: Seoul Social Economy Center, Seoul Coop Support Center, Seongbuk-Gwangjin Social Economy Center, Eunpyeong-Geumcheon Social Economy Solidarity (upper-level management), etc. ▶ Social economy officer of SMG

Social enterprises have relatively high levels of employment in terms of sheer quantity but also higher levels of employment and better employment conditions for women and socially vulnerable individuals than regular corporations. As of 2014, women comprised 63% of the workforce at social enterprises (regular corporations: 28.6%). The socially vulnerable accounted for 54.3% of their employees. The income levels of socially vulnerable individuals increased by 120 percent compared to pre-employment or incomes derived from related commercial corporations. Social enterprises also provided far better insurance coverage. According to the Korean Association for Public Administration’s research, close cooperation with social enterprises that adhere to corporate ethics under the leadership of the public sector increases overall societal integrity.