[Yun Suk-myung's Perspective] Pension Reform on Which the Nation's Future Depends — Principled Civil Servants Must Take the Lead

[JoongAng Ilbo · Yun Suk-myung's Perspective · December 13, 2021]

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA), President of the Korean Pension Association, and Head of the Pension Division of Reset Korea

Pension Reform: 'Belling the Cat'

This happened in Greece during the 2008 global financial crisis. A pharmacist in his 70s, who had been surviving on food discarded by others because his pension was reduced due to austerity policies, committed suicide. It was a tragic situation experienced by Greece, where nearly half of the government's fiscal deficit was used to cover pension deficits. Yet, Greece achieved pension reform in a direction far more sustainable than ours. Although external forces acted during the process of overcoming the economic crisis, the overhaul halved the pensions of high-benefit recipients while increasing the pension amounts of vulnerable groups.

What is the reality of our pensions as of 2021? National liabilities for the Government Employees Pension and Military Pension increased by more than 100 trillion won last year alone. The latent liabilities of the National Pension are increasing by more than 400 billion won per day. The future of the Private School Teachers Pension, exposed to low fertility, is a disaster in itself. Even in this situation, certain generations are profiting from state guarantee of benefit payment provisions that are rare worldwide. All while pretending not to know who will suffer and how much. How shameless is such behavior?

The reality of the National Pension's latent liabilities increasing by more than 400 billion won per day; leading presidential candidates are watching from the sidelines, claiming it does not help them get votes; Japan succeeded in pension reform thanks to civil servants who thought of the people; the minutes of related meetings must be disclosed to reveal the dire reality and move public opinion

The Absurd Pension Overhaul Plan of the Moon Jae-in Administration

It is necessary to look back at the process of the Government Employees Pension overhaul in 2015. When told to reform the Government Employees Pension, the content they suddenly agreed upon was to increase the benefit rate of the National Pension. This was because they failed to properly implement the reforms that actually needed to be done and instead shifted the burden to the National Pension. Why did these things happen?

They argued that because the benefit rate was significantly lowered in the 2007 National Pension reform, which was achieved with great difficulty after much pain, the Government Employees Pension benefit rate appeared high. They claimed that the Government Employees Pension amount only seemed large because the National Pension benefit rate was lowered without any countermeasures... Therefore, they said that increasing the National Pension further and slightly lowering the Government Employees Pension was the way to strengthen public pensions. Based on this logic, they established a 'Social Body for Strengthening Public Pensions and Resolving Poverty in Old Age' in the National Assembly. All while failing to properly carry out the Government Employees Pension reform they were told to do...

The pension pledges of the Moon Jae-in administration were created in this context. This is the background behind why the Moon Jae-in administration's pension overhaul plan—which proposed further increasing the National Pension benefit rate on the condition of slightly raising the contribution rate, arguing that the 40% benefit rate was too low—was submitted to the National Assembly. An overhaul plan emerged that, under the pretext of strengthening public pensions, would fatally weaken the National Pension, which would reach a cumulative deficit of 17,000 trillion won by 2088 even if left alone.

How absurd this overhaul plan is becomes clear when looking at foreign examples. In Germany, where the burden was more than five times higher in the past and remains more than twice as high now, and where national income is also higher than ours, the average pension amount is around 1.25 million won (943 euros, as of 2019). Japan, which has also borne contributions more than twice as high as ours, has pension amounts—including those for civil servants—that are far lower than ours.

Among the flood of pledges poured out almost daily, pension-related pledges are hard to find. Nevertheless, Kim Ho-il, Chairman of the Korean Senior Citizens Association, proposed a Basic Pension amount of 1 million won to Song Young-gil, leader of the Democratic Party, and Representative Song responded that he would consider it as a pledge. Long after the golden time for pension reform has passed, they are attempting an infinite sprint into a mire from which it is difficult to escape. In this moment when the Republic of Korea could fall into an abyss, should we just stand by dazed and watch such irresponsible behavior?

A pension system is not a magic wand. You cannot give more pensions just by waving a wand and asking for more. While it may seem tempting, if you peel back one layer, they deceive and agitate the public—who lack an understanding of how pension systems work—by packaging it with logic that differs from the facts. A pension system is simply a system where money comes in and goes out; if someone receives more, someone else must contribute more.

If the pension issue were this simple, why would Scandinavian countries like Sweden, which are called welfare advanced nations, as well as Germany and Japan, have undergone painful pension reforms? Why were they forced to carry out reforms even at the cost of losing power, instead of simply saying there was no problem, as we do?

Government Employees Pension fiscal reports not disclosed

Bert Rürup, who played the role of midwife for the 2004 German pension reform, persuaded the public with the concept of intergenerational equity. While reaching a social consensus on the concept of fairness is not easy, his logic was that it cannot be seen as fair if one generation suffers significantly more loss compared to another. Because the German people accepted the argument that pension reform was inevitable to resolve such unfairness, a groundbreaking change in direction was possible.

In our political reality, where leading presidential candidates avoid pension reform while constantly looking for opportunities to put forward populist policies, who should lead the dangerous task of pension reform?

'Belling the cat' is a story about mice from Aesop's Fables. It is a story where they discuss who will bell the cat—which would allow them to know in advance when it is coming—given that whoever does it risks being eaten. In the field of pensions, this phrase became famous because of Jose Piñera, the Minister of Labor who was in charge of the 1981 Chilean pension reform.

To bell a fierce cat, the sharing of facts is first required. It is said that Finland has its financial projection reports verified by other countries. In Canada, the person responsible for drafting the financial projection report signs a statement on their conscience that the report is objective and utilizes their knowledge to the fullest.

What about us? The 2020 Government Employees Pension financial projection report has still not been disclosed. Despite how serious the situation is, no materials have been uploaded to the resource archive on the Government Employees Pension Service website since March 2019. The Military Pension is a complete black box. The 2020 Private School Teachers Pension financial projection report was only uploaded to the website in November 2021, more than a year later.

What about the National Pension? One committee member resigned midway in protest of the dysfunctional operation of the National Pension System Development Committee based on the 2018 National Pension financial projection. This was because the committee had been operated dysfunctionally to an unprecedented degree. The minutes of the committee, which contain the agonized remarks of the members, remain undisclosed. This contrasts with Japan, where not only are financial projection reports for pensions including those for civil servants disclosed, but the full content of the committee minutes—not just summarized versions—is posted on the Ministry of Health, Labour and Welfare website along with the real names of the speakers.

The First Step of Pension Reform Is Sharing Facts

The first step of pension reform lies in the sharing of facts. The media has a duty to inform the public of the facts that proper, politically neutral experts seek to reveal. It is the responsibility of the political sphere to put the facts made known to the world through the media up for public deliberation. Representative Kim Se-yeon, who served as Chair of the Health and Welfare Committee in the second half of the 20th National Assembly, said, "Let us not be bad adults." Denouncing the political sphere for being passive toward pension reform, he declared that he would not run for the National Assembly.

In the political sphere, Representative Park Yong-jin and former Representatives Yoon Hee-sook and Yoo Seung-min, who emphasized pension reform, are good examples. Ahn Cheol-soo, the presidential candidate of the People's Party, announced a pledge for a unified pension system that would unify the payment and contribution standards of public pensions such as the National Pension and the Government Employees Pension, and is pressuring other leading presidential candidates to present their own pension pledges. Candidate Sim Sang-jung is also said to be preparing an overhaul plan for pensions.

If the minutes of committees containing the concerns of pension experts are disclosed, and the media puts them up for public deliberation, allowing politicians with a sense of problem-awareness to turn them into key issues, things that seem impossible may become possible. Where there is a will, there is a way; if the conscientious forces of our society gather to put this issue up for public deliberation, some of the MZ generation, who are sensitive to fairness issues, will lend their support. It is also highly likely that the conscientious older generation, who enabled us to live as we do now, will lend their support, stating that they do not wish to make life difficult for their children's generation.

The disclosure of proper financial projection reports and the remarks in the minutes of agonized expert committee members, the public deliberation by politicians, and the subsequent process of turning this into a social issue could be enough to bell the cat in pension reform. The powerful entity capable of doing this is the civil servant—specifically, the civil servant who became one for the sake of the state and the people and remains faithful to their duties. Only when there is the will and effort of civil servants to share facts with the public from the public's perspective, even in the face of unfair instructions from some superiors contaminated by politics, can good results be achieved.

Japanese Civil Servants as a Lesson to Learn From

The remarks made by Japanese presenters at an international symposium held on November 25 between the Korean Pension Association and Japanese experts have left a long-lasting impression. These were the remarks of Junichi Sakamoto, former Director of the Actuarial Affairs Division of the Ministry of Health, Labour and Welfare, and Hironobu Ueda, Director of the Ministry of Health, Labour and Welfare. They stated that the background enabling Japan to unify public pensions by integrating the National Pension and the Government Employees Pension, and to achieve fiscal stabilization up to 2120—100 years from now—was that civil servants worked from the perspective of the people. They also said it was something to be proud of to other countries. If our civil servants also work from the perspective of the people and strive to widely disseminate the facts, we can bell the cat, even if it seems difficult.

At this point, the two candidates who seem most likely to be elected president, Lee Jae-myung and Yoon Suk-yeol, have not put forward any pension-related pledges even with less than 100 days remaining until the presidential election. Based on the sharing of facts, it is time for the conscientious forces of our society to unite firmly and make various efforts so that these candidates can present proper pension pledges.

Source: JoongAng Ilbo (original article)