Korean seniors' spending tumbles on lower income

Consumption by South Koreans falls sharply when they become senior citizens because of a tumble in their income, a report showed Wednesday

Consumption expenditures by South Koreans aged 65 and older amounted to 63.37 percent of average household spending as of 2014, down from 68.97 percent in 2005, according to the report by the National Pension Research Institute.

The figure was much lower than 81.57 percent in the United States and 86.89 percent in Japan. 

The sharp drop in South Korean seniors' spending was attributed to their low income.

The average income of elderly people in South Korea was 63.93 percent of the median for all people, much lower than 71.75 percent in the U.S. and 81.57 percent in Japan. 

The elderly people's average monthly pension benefits accounted for just 16.31 percent of the average income of all Koreans in 2013, compared with 34.59 percent in the U.S. and 64.77 percent in Japan.

It is mainly due to Seoul's late introduction of a public pension system. South Korea launched the national pension only in 1988, while the U.S. started it in the 1930s and Japan in the 1940s.

Due to low pension benefits, South Korea's elderly poverty rate is the highest among the 34 member countries of the Organization for Economic Cooperation and Development, while the net pension replacement rate is very low.

According to a 2015 report by the Korea Labor Institute, the poverty rate for senior people in Korea was 47.2 percent in 2014.

The poverty rate refers to the rate of households that earn 50 percent or less of median household disposable income.

The country's net pension replacement rate for the elderly was 45.2 percent, far below the OECD average of 65.9 percent, as of 2012. The net pension replacement rate is the level of the individual net pension entitlements divided by net pre-retirement earnings. 

According to the report by the pension research institute, South Korean seniors' consumption focused on food, beverages, homes and health, while their counterparts in the other two countries spent more on entertainment and cultural activities.

For elderly households, spending on food and beverages accounted for 19.7 percent of their total consumption; 14 percent for homes, piped water, heating and lighting; and 10.7 percent for health. The comparable ratios for entire households were 13.8 percent, 10.4 percent and 6.6 percent, respectively.

The share of entertainment and cultural spending out of total expenditures was 5.2 percent for elderly households, lower than 5.8 percent for all households. (Yonhap)