The Welfare System Must Strengthen Its Middle

[Seoul Sinmun · Open World · August 11, 2015]

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA) and Adjunct Professor of Economics at Korea University

The last general election and presidential election were elections where the welfare debate swallowed other issues. Immediately after the presidential election, the country suffered greatly over the method of introducing the Basic Pension. After the Basic Pension issue was settled, the country was in turmoil for nearly a year over the reform of the Government Employees Pension. In the meantime, the next general election is approaching. "Welfare Debate Season 2" is drawing near.

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA)

The history of introducing pension systems in the majority of Organisation for Economic Co-operation and Development (OECD) member countries spans at least 60 years. Because these systems are old, older people are the wealthiest generation. This is also due to generous pension benefits from the era of high growth. A recent OECD report presented at an international conference hosted by the "OECD Korea Policy Centre's Social Policy Division" emphasized that the problem of poverty is shifting from older people to young people. The message is that national capabilities must be concentrated on solving the problem of youth poverty.

What is our reality? The National Pension was expanded to all citizens in April 1999. Since it has been only 16 years, elderly poverty is becoming a problem. However, there is a fact that must not be overlooked: not all older people are poor. While there are many impoverished older people, there are also a significant number of the wealthiest older people in our history. Despite this situation, facts are being distorted as if all older people in our country are poor.

Due to the daily deepening polarization of income in our society and free welfare benefits concentrated on the most disadvantaged groups, the awkward lower-middle income class caught in the middle is experiencing great difficulty. There are not many welfare benefits for the group that would find relief if the state provided just a little help. This is also why the public's perceived level of welfare remains low despite the surge in welfare spending.

It seems it is now time to rebuild our society's infrastructure so that welfare benefits properly reach those who need them. It is time to produce accurate statistics on how many older people are truly in dire living conditions and to what extent income polarization has deepened. Even for the Gini coefficient, which shows income inequality, there is a significant difference between official government statistics and the statistics claimed by some experts. This is due to the range of property and the wealthy class included in the survey targets.

We must hurry to compile statistics that can properly reflect reality. According to an International Monetary Fund (IMF) report published last year, income inequality in our country is lower than in Japan based on income, but it appears higher than in Japan when assets are included. The high elderly poverty rate is also a problem that arises because real estate assets are not considered. Unlike other OECD member countries where financial assets such as pensions constitute the majority, our reality is that real estate assets make up the majority; because this is not considered, the elderly poverty rate appears higher than it actually is.

Government policies can only gain momentum if statistical data that citizens can easily accept are produced. Dramas dealing with youth issues are gaining popularity. Because it is difficult to find employment and most jobs even after employment are contract positions, young people cannot plan for the future. This is why the fertility rate does not rise even though the government puts forward many measures. How can they think of marrying and having children when the future is uncertain?

I am not saying that we should neglect the problem of elderly poverty. I am saying that we must dispassionately judge who the truly impoverished group is across all age groups. No matter how generous a social security scheme is created because old-age income security is important, if the younger generation—the waist—that supports the system becomes frail, the future of that social security scheme cannot help but be bleak.

I hope that productive debates take place in the upcoming "Welfare Debate Season 2." The greatest advantage that welfare, and especially social security schemes, can provide is reducing the fear of future uncertainty. There must be an expectation that the state will provide support to enable a minimum standard of living even if one fails in social life. Only then can the younger generation challenge themselves to do what they want without fear. In this process, creativity will be unleashed, and consequently, national productivity will increase.

Surrounding conditions have changed significantly in the meantime. Low growth has become entrenched, and the baby-boom generation is beginning to exit the labor market in earnest. A number of people larger than the entire population of a small Northern European welfare state is turning into welfare beneficiaries. The beautiful spring days are passing quickly. Any further wasteful debate will be nothing but a national disaster.

Source: Seoul Sinmun (original article)