Despite Having the Highest Elderly Poverty Rate in the OECD, Korea's Public Pension Investment Falls Short

Even though Korea holds the highest elderly poverty rate among the 38 OECD countries, government expenditure on public pensions for the elderly remains at only half the average level of OECD nations.

 

In relation to this, some experts argue that a comprehensive consideration of the reasons behind high elderly poverty rates and the government's lack of investment in public pensions is necessary.

 

According to the 'Pensions at a Glance 2021' report released on the 27th, based on data from 2017, the proportion of Korea's government expenditure invested in public pensions stood at a mere 9.4% of total government spending. This is significantly lower than the OECD average investment rate of 18.4%. Notably, it's even lower than that of Iceland (6.2%).

 

Public pensions constitute a major portion of social expenditures in many countries, and on average, OECD member countries allocate 18.4% of total government spending to them. In contrast, Korea exhibits a disparity of over two times that figure.

 

Nations like France, Japan, Germany, and Finland allocate over 20% of total government spending to public pensions. Even countries like the United States, Sweden, and the United Kingdom invest a higher percentage than Korea.

 

Furthermore, Korea's public pension spending relative to its Gross Domestic Product (GDP) is lacking. Korea's public pension investment ratio to GDP is 2.8%, markedly lower than the OECD average of 7.7%. In comparison, countries like France (13.6%), Germany (10.2%), and Japan (9.4%) invest at significantly higher levels.

 

The OECD report mentioned that "Korea, Chile, Iceland, and Mexico invest less than 3% of GDP in public pensions." It explained, "Chile and Mexico have relatively low investment rates due to a lower average age and lower pension enrollment rates."

 

However, the report didn't provide a clear reason for why Korea falls so short in public pension investment.

 

Despite this situation, Korea records the highest elderly poverty rate among OECD countries. This rate represents the percentage of the population with a disposable income below 50% of the median-equivalized household income, and for Korea, the elderly poverty rate stood at 43.4% based on 2018 data. This is over three times the OECD average of 13.1%.

 

In contrast, countries like France, Germany, Sweden, the United Kingdom, Japan, and the United States report much lower elderly income poverty rates than Korea.

 

The OECD stated that "Korea undertook reforms, including expanding the recipients of basic pensions in 2018, but its elderly safety net is at the lowest level among OECD member countries," and that "this situation does not demonstrate sufficient measures to address elderly poverty issues."

 

In relation to this, some experts argue that a comprehensive consideration of the reasons behind high elderly poverty rates and the government's lack of investment in public pensions is necessary. Professor Ju Eun-sun of Gyeonggi University's Department of Social Welfare stated, "The National Pension System is not just a simple insurance system; it has a redistributive nature, making the government's responsibility significant." She emphasized, "Even if a high ratio of public pension spending is burdensome, the government should consider continuous financial support. In Germany, for instance, 25% of total pension spending is covered by taxes."