The present study investigated the relationship between social income transfers and the income security of the working poor. The specific aim of this study is to analyze the poverty reduction effect of social income transfers among the working poor from 1998 to 2005, during the pre NBLSA period (from 1998 to 2001) and the post NBLSA period (from 2002 to 2005). Particularly, this study compared the effect sizes of social income transfers and private income transfers on poverty reduction. While the main target population of this study was the working poor, this study also examined poverty reduction of the non-working poor as well.

To achieve the study aim, this study used the Korean Labor and Income Panel Study (KLIPS), a nine-year panel dataset that includes 5,000 households with 13,300 individual cases. This study consists of cross-sectional macro-level analysis and longitudinal micro-level analysis. First, by employing a macro-level approach, this study examined the overall poverty reduction effectiveness of the current social income transfers among the working poor. Second, by employing a micro-level approach, this study also examined the impact of social income transfers and poverty reduction dynamics of individual households.

The results of the macro-level analysis supported most of the hypotheses. First of all, both social income transfers and private income transfers have reduced the poverty rate and the aggregate poverty gap among the working poor as well as among the non-working poor over the nine-year period. The micro-level analysis identified elements affecting the poverty gap and the propensity to escape from poverty of individual households.

The empirical evidence indicates that the NBLSA has significantly improved the poverty reduction effect of social income transfers especially for the working poor. As such, it seems that the NBLSA has succeeded in accomplishing its intended goal, which was to expand the coverage of social welfare to the working poor. Another implication of the present study involves the family type and the effect of income transfers. As shown in micro-level analysis, while social income transfers more effectively reduce the poverty gap among no children families, they are relatively less effective among two-parent with children families.