Health and Welfare Minister Park Neung-hoo said last week that the government has no plan to make new proposals for reforming the national pension system during the remainder of President Moon Jae-in’s five-year term that ends in 2022.
At a meeting with reporters, he also ruled out the possibility of the administration singling out an option to facilitate parliamentary deliberation on pension reform.
In December 2018, the Health and Welfare Ministry submitted a set of reform proposals to the parliament and let lawmakers choose one of them or work out separate measures to overhaul the pension scheme.
None of the four options suggested by the ministry have gone far enough to ensure the long-term sustainability of the state pension system, which is under increasing strain. In an apparent bid to avoid provoking public discontent, the proposed options envision that most of the planned increase in insurance premiums would come after the end of Moon’s tenure.
The previous parliament, whose four-year term ended last month, made little progress in deliberating on pension reform, with lawmakers having asked the administration to present a single option worth focused discussion.
Last year, a panel under the Economic, Social and Labor Council consisting of representatives from labor, management and the wider public suggested a separate set of proposals for pension reform, which went little further than those offered by the government.
The Moon administration is criticized for having virtually abandoned serious efforts to overhaul the national pension system introduced in 1988.
Last week’s remarks by the health and welfare minister are tantamount to declaring it has set aside the crucial and long-overdue reform task.
Significant reform should be made to make the pension scheme sustainable in the long term and ensure a balanced sharing of the burden between younger and older generations.
According to a report released Sunday by the National Assembly Budget Office, the state pension fund, which amounted to 730 trillion won ($604 billion) as of end-2019, is forecast to be depleted by 2054 if the current scheme remains unchanged, amid the rapid aging of the population coupled with a plummeting birthrate. The prediction is much gloomier than a 2018 projection by the government that the pension fund will be exhausted by 2057.
Pension premiums now account for 9 percent of wages, with the income replacement rate set at 40 percent.
The gap between the number of pension recipients and subscribers paying insurance premiums is expected to widen at an accelerated pace in the coming decades.
According to data from the National Pension Service, the number of retirees drawing a pension is projected to rise from 5.22 million in 2020 to 16.01 million in 2050, while the corresponding figure for subscribers is forecast to drop from 22.04 million to 14.95 million over the cited period.
Park, the health and welfare minister, hoped that the current National Assembly would seriously take on pension reform during the early part of its four-year tenure that began May 30 or the reform task would emerge as a key issue in the course of the presidential election campaign in 2022.
His wish is just as irresponsible, given the political calendar will continue to make the ruling and main opposition parties reluctant to pass an effective reform bill accompanied by a significant rise in pension premiums.
In the current parliament, the passage of a reform measure depends entirely on the ruling Democratic Party of Korea, which secured a dominant majority in April’s legislative election. With the next presidential vote less than two years from now, it is unlikely to work hard to implement an unpopular reform. A 2018 survey by a state-run think tank found more than 45 percent of respondents opposed increasing payments into the national pension, compared with 23.6 percent in favor of it.
The economic difficulties caused by the coronavirus pandemic will also make it harder to push for reform that would result in increasing the financial burden on wage earners.
Nonetheless, the administration and the ruling party should not let pension reform drift further to avoid placing an undue burden on younger generations. It is necessary to complete the reform work within three to four years, before the country’s baby boomers -- those born between 1955 and 1963 -- leave the workforce.
The government is urged to work out a concrete plan to ensure the long-term sustainability of the pension scheme, which could serve as a solid base for the legislative process. President Moon, who pledged to carry out pension reform during his election campaign, should see to it that the task should be done before he leaves office.
