A basic pension overhaul ordered directly by President Lee Jae-myung has been halted just before its release. With the property tax overhaul also increasingly likely to be scaled back after pushback from the ruling party, and with the president's approval rating recently falling, concerns are growing that reform measures that raise the public's burden or trim existing benefits are losing momentum one after another.
The Ministry of Health and Welfare abruptly canceled a preliminary briefing on the basic pension overhaul about one hour and 10 minutes before it was scheduled to begin at 2 p.m. on the 27th. The ministry said it had "no choice but to cancel because some elements of the basic pension overhaul have not been finalized." It said a new schedule would be announced later.
The government had planned to explain the direction of the overhaul to reporters that day and to unveil the plan in line with the Cabinet meeting on the 1st of next month that will finalize the government budget. Health and Welfare Minister Jung Eun-kyeong had been set to lead the preliminary briefing herself, meaning coordination within the government broke down just ahead of the announcement.
Following the president's instructions, the government has been pursuing an overhaul that would pay more generous basic pension benefits to low-income older adults while reducing them for those with higher incomes. The president has said several times that low-income support needs to be strengthened, pointing to the current structure in which older adults with almost no income and those with steady income receive similar levels of basic pension.
After the property tax, now the basic pension: reform drive hits the brakes
In recent weeks, the government has repeatedly revised reform plans that carry heavy political costs.
The most prominent case is the comprehensive real estate holding tax. In a tax overhaul announced on the 3rd of this month, the government shifted the tax from a system based on the number of homes owned to one based on value, raising the basic deduction for owners of a single home they live in to 14 billion won from 12 billion won while cutting it to 9 billion won from 12 billion won for owners of a single home they do not live in. It also proposed raising the cap on the increase in tax liability to 200% from the current 150%.
The ruling party, however, applied the brakes. Kim Min-seok, leader of the Democratic Party of Korea, publicly raised objections at a senior party-government meeting on the 23rd, saying the plan to lower the basic deduction for non-resident single-home owners to 9 billion won and raise the tax liability cap to 200% "requires in-depth deliberation."
The government is now seriously considering keeping the basic deduction for non-resident single-home owners at the current 12 billion won rather than the 9 billion won in the original plan. Maintaining the current 150% cap on tax liability instead of the government's proposed 200% is also under discussion. If confirmed, core elements of the tax overhaul released earlier this month would be partly rolled back in less than a month.
With the basic pension overhaul now also stalled, some observers say the government has begun to slow down in earnest on sensitive policies. The basic pension is politically costly as well, because expanding benefits for low-income recipients requires adjusting benefits for relatively higher-income older adults among existing recipients.
The recent drop in the president's approval rating is another burden for the government. In a survey of 2,001 adults nationwide conducted from the 22nd to the 24th by Zoa C&I for Straight News, positive assessments of the president's performance stood at 38.9%, down 4.0 percentage points from the previous survey. It was the first time the figure had fallen to the 30% range since he took office. After the results were released, the presidential office said it would "put livelihoods and the economy first" and "look carefully at the overall management of state affairs."
Still, with wide gaps between polls, it is difficult to conclude that the recent policy adjustments are a direct result of the falling approval rating. In the National Barometer Survey released on the 27th, positive assessments of the president's performance stood at 50%, up 1 percentage point from two weeks earlier.
