[Editorial] Public pension reform

The government recently raised the ceiling on the number of central administrative employees by 20,000 to nearly 300,000. The measure was taken to back President Park Geun-hye’s campaign pledge to hire more police officers, firefighters and welfare workers to help strengthen public security and tighten the social safety net.

Now it seems only a matter of time before the number of public employees at central and regional governments surpasses the 1 million mark. If inevitable, more civil servants need to be hired. But the planned increase in manpower is met with mounting concerns over a ballooning deficit in the government employees’ pension fund, which has been shored up by money from state coffers since 2001.

A recent report released by the Korea Development Institute, a state-run think tank, forecast that about 30 trillion won ($27 billion) in taxpayers’ money would have to be spent to fill the deficit over the five years to come. The sum accounts for more than a fifth of the cost of financing a package of welfare programs promised by President Park during her campaign last year. According to the report, the amount of money needed to compensate for the shortage of the public officials’ pension funds, which stood at 2.1 trillion won in 2010, is projected to swell to 6.2 trillion won in 2015, 10.5 trillion won in 2020 and further to 24.5 trillion won in 2030.

This scheme is simply unsustainable. As KDI researchers indicated, Park’s government should undertake overhauling the structure as early as possible. It will be a tough task to force civil servants to agree on contributing more and receiving less to make their pension system viable. That’s why the administration should take on the work at the initial phase of its term before it begins to lose steam in pushing for its key agenda.

The Defense Ministry this week announced measures to reform the military pension scheme, which has also been kept alive with taxpayers’ money since 1977. The revised model, which is to be put into practice in July, will require military personnel to make more contributions while guaranteeing the current level of pension payments. Critics note it will still be far short of being financially sustainable.

Revamping public pensions is all the more necessary to keep balance with the national pension system covering private-sector workers. Prompted by the prospect that its funds will have been exhausted by 2060, measures were taken in 2007 to slash pension payments by 30 percent and raise the age for receipt gradually from 60 up to 65.

Currently, public pensioners on average receive nearly double the amount paid to national pension subscribers. Public pensions account for about 70 percent of pre-retirement income, compared to just 50 percent for national pension recipients. Under these circumstances, ordinary citizens feel it increasingly unjust and unbearable to guarantee pensions for retired public servants with their tax money, while they struggle with unstable and temporary work. Many people reeling under heavy household debt will find it absurd to subsidize payments to each of the roughly 348,000 recipients of the public employees’ pension with more than half a million won of taxpayers’ money every year.

It is worrisome that the unequal pension schemes will lead people to have a deeper sense of deprivation and thus hamper social integration, which is needed to solve the problems facing the country. In this context, the new administration should put top priority on overhauling public pensions. Over the long term, consideration may be given to incorporating public and national pensions into a unified mechanism.

In more immediate efforts, Park’s government should maintain a proper cap on the civil service, though it may be somewhat necessary to recruit more security-related public servants. It is easy to add public employees but it is extremely difficult to scale down civil service, as proved by the failure of the previous administration under President Lee Myung-bak in carrying through its initial downsizing plan.