Korea Shelves Basic Pension Overhaul as Fiscal Burden Mounts

The government's abrupt cancellation of its plan to unveil a "more for the poor, less for the better-off" overhaul of the basic pension has raised concerns that momentum for reform is fading. The Ministry of Health and Welfare had prepared a plan to narrow the pool of recipients while raising payments to low-income older adults, but it scrapped Minister Jung Eun-kyeong's advance briefing, scheduled for the 27th, just 70 minutes beforehand. Under the ministry's plan, the basic pension — now 350,000 won a month for the bottom 70% of people aged 65 and over — would be paid on a sliding scale tied to the government's median income benchmark. The eligibility threshold, set at 96.3% of that benchmark this year, would be lowered in stages to 80% by 2030, while payments to the lowest-income recipients would rise to 400,000 won. The aim is to ease the fiscal burden while reducing poverty among older adults.

With South Korea now a super-aged society, where people 65 and over account for more than 20% of the population, reworking a program that pays most older adults is urgent if public finances are to remain sustainable. According to the Korea Institute for Health and Social Affairs, the basic pension budget will swell to 27.5 trillion won this year and 52.9 trillion won by 2040, from 6.9 trillion won in 2014, its first year. A flat payment, moreover, does little to relieve poverty among older adults. It is hard to accept, then, that the overhaul — an issue President Lee Jae-myung himself put on the table — has been brought to a sudden halt. Nor is it unreasonable that analysts suspect the government shelved the reform out of concern over public backlash, at a time when the president's approval rating is slipping.

Last month the ministry also called off a meeting of the Health Insurance Policy Deliberation Committee a day in advance, halting discussion of changes to how national health insurance premiums are levied — changes that would effectively raise premiums. Health insurance finances are projected to swing into deficit this year, making the overhaul urgent, yet no new meeting has even been scheduled. The worry is that reforms to health insurance and the basic pension, both essential to preparing for a rapidly aging population, will be sharply scaled back or drift indefinitely. If the government keeps delaying welfare reform to avoid public displeasure, the snowballing burden of fiscal spending will fall squarely on future generations. No matter how many programs for young adults are drawn up or how much money is budgeted for them, the future cannot brighten for a generation left holding a fiscal time bomb. The time for delay has passed.