“If this is the case, they shouldn’t have touched it at all… They’ve kept the structure intact while only increasing the financial burden on future generations. It’s like telling an overweight patient with adult diseases to lose weight, only to add more fat.”

Yoon Seok-myung, 65, a senior honorary researcher at the Korea Institute for Health and Social Affairs, evaluated the government’s basic pension reform plan in an interview with this newspaper on the 1st, stating, “Money is being indiscriminately given to elderly people who don’t urgently need support, and even the absolute poor receive similar amounts. This is populism that pours more taxes without significantly reducing the poverty rate.” The government announced a reform plan to maintain the current eligibility criterion of “the bottom 70% of elderly income” while providing an additional 30,000 Korean won to the bottom 30% of elderly income earners compared to this year.

-What is the problem with this government’s reform plan?

“A plane called ‘South Korea’ that needs to reach New York’s JFK Airport is about to crash in the sky above Hawaii, so we started pension reform by installing a powerful engine. However, this measure has caused it to crash in the sky above Tsushima Island. It’s a worsening reform that is even worse than not intervening. Discussions were held about ‘targeted’ reforms that break the original goal of a 70% coverage rate and focus benefits on the poor elderly. But the 70% criterion hasn’t been touched.”

-Why couldn’t the 70% criterion be revised?

“It’s due to the political circle’s cowardice and populism. They abandoned necessary structural reforms because they were wary of the 5060 generation, who are potential future recipients, out of concern for votes. Politicians aren’t in their positions just to calculate votes. They are there to design the future for the sustainability of society and intergenerational fairness. This announcement, which fails to present any fiscal roadmap, is a political fraud disguised as ‘pension reform.’”

-Doesn’t the plan give an additional 30,000 Korean won monthly to the bottom 30%?

“For those on the margin, 30,000 Korean won can be sensitive and might slightly reduce the poverty gap. However, it’s difficult to drastically lower the elderly poverty rate with an increase of 30,000 Korean won, which lacks a clear basis for calculation. This is populism that pours more taxes without lowering the ‘poverty rate,’ the key indicator. The OECD has pointed out since the introduction of South Korea’s basic pension system that the cost-effectiveness of poverty alleviation is inefficient.”

-There are also concerns about equity with the national pension and fiscal sustainability.

“If cash benefits are indiscriminately increased for the majority, workers who have faithfully subscribed to the national pension may feel a sense of loss and even give up their subscriptions. As the country enters a super-aged society, the financial burden of the basic pension will fall entirely on the tax payments of future working generations. Without considering the role division with the national pension or long-term fiscal sustainability, the coherence of the multi-layered old-age income security system has been severely damaged by simply increasing cash expenditures.”

-The basic pension will now be given to recipients of special occupational pensions (civil servant and private school pensions) with income below 45% of the median.

“This is a fatal blunder. Civil servant pensions, etc., have a loophole that allows recipients to take them as a ‘lump sum’ instead of a pension. There’s a risk of abuse where people might take partial lump sums to meet the income criteria. The law should first be revised to ensure that civil servant and private school pensions are received only as pensions, like the national pension.”

-The issue of reducing the amount received by those who simultaneously receive the basic pension and livelihood benefits, which has been criticized as ‘giving and taking away,’ wasn’t addressed. Should this also be revised?

“This is a wrong frame. Both livelihood benefits and the basic pension are tax-funded systems with the same essence. Livelihood benefits are designed to fill the gap up to the minimum living standard. It’s demagoguery to claim that reducing livelihood benefits when income is supplemented by the basic pension is ‘taking away.’”

-In what direction should the basic pension go?

“It should become a minimum living security system focused on the ‘truly poor’ below the livelihood benefit line. It should break free from the 70% coverage rate framework and set the basic pension recipients at 40-60% of the median income, which the OECD views as the poverty line. Then, the basic pension should be divided into multiple layers, such as cash benefits, vouchers, and housing support. Provide a basic cash amount of 350,000–450,000 Korean won to all recipients, and add food vouchers or housing support for the extremely poor who need additional help. Simply increasing cash benefits can create a sense of relative deprivation among those who faithfully paid into the national pension. Managing cash amounts at an appropriate level while ensuring a minimum living standard through vouchers is the way to enhance fiscal efficiency.”

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