The Operation of the National Assembly Special Committee on Pension Reform Is Below Standard

[Asia Today · Column · July 21, 2024]

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

During the 2012 presidential race between candidates Park Geun-hye and Moon Jae-in, Sweden received great attention from us. This was because Candidate Moon Jae-in stated that he would make a "life with evenings" possible for us, just as it is in Sweden. Consequently, lawmakers in Yeouido also studied the Swedish welfare state diligently. On the other hand, welfare scholars who praised the Swedish welfare state so much began to avoid mentioning the Swedish pension system. This phenomenon persists even now, while the pension debate is in full swing under the Yoon Suk-yeol administration. Why is that?

To commemorate the signing of a Memorandum of Understanding (MOU) on health and welfare cooperation between Korea and Sweden, an international seminar on pensions was held at the Press Center in Seoul on September 9, 2013. Following keynote speeches by Jin Young, Minister of Health and Welfare from our side and Minister Ulf Kristersson of Social Security (the current Prime Minister of Sweden) from the Swedish side, two people from each side gave presentations. Minister Kristersson's keynote speech was particularly impressive.

At an outdoor dinner at the Swedish Ambassador's residence in Seongbuk-dong, Seoul, then-Ambassador Lars Danielsson approached and sat down next to me, as I had been one of the Korean presenters. Thinking it was an opportunity to satisfy my curiosity, I asked, "How does the Minister possess such profound knowledge about pensions? Is he from a professional background?" He replied that he was a "politician." He said it was the result of growing up while receiving systematic training within a political party since childhood. This is a point that differs greatly from our political climate.

Ambassador Danielsson's answer to the question "How was the 1999 Swedish pension reform, called the 'reform of the century,' possible?" was surprising. He said it was because of "the trust built over 100 years of developing the pension system, the sense of responsibility among politicians, constant adaptation to environmental changes, and considering the direction of system improvement while thinking about 'the children's generation and grandchildren's generation,' and even 'the grandchildren's grandchildren's generation.'" This is the exact opposite direction from where we are now.

The current state of Sweden's pensions and national debt, having prepared a reform plan with such an attitude, is a surprise in itself. According to the latest data (April 2024) submitted by the Swedish government to the European Union (EU), the public pension benefit rate (BR, Benefit Ratio), from which all citizens benefit, will fall from 36% (2022) to 30% (2070). The income replacement rate of the public earnings-related pension will drop from 32% to 25%.

Even though the old-age dependency ratio increases from 36% to 50.4%, the pension expenditure ratio relative to GDP decreases from 7.4% to 7.2%. This contrasts sharply with Korea, where it is projected that all public pensions (including the Basic Pension and Government Employees Pension) will exceed 15% of GDP. But that is not all. Even after experiencing the COVID-19 pandemic, their national debt ratio remains below 40%. This is the true face of Sweden. Because this is the reality of Sweden, it seems that the political sphere and welfare scholars in Korea treat mentioning Sweden as a taboo.

Norway and Finland, which attended the 18th OECD Pension Experts Meeting, also show similar trends to Sweden, differing only in degree. This is why Norwegian and Finnish experts say they are convinced that the Korean pension system is unsustainable. With a birth rate at the lowest level in the world, how absurd must they have felt when they encountered the Korean pension reform discussions, which aim to further increase the income replacement rate of 40% while only slightly raising the contribution rate of 9%, which is far too low internationally? It is so embarrassing that I can hardly hold my head up!

"The future of the nation takes precedence over the interests and values pursued by political parties. The same applies to interest groups." This was mentioned by Professor Choi Yeon-hyeok of Södertörn University in Sweden in the appendix (page 431) of the "Study on Policy Measures for Establishing a Multi-tiered Old-Age Income Security System (Ministry of Health and Welfare · Korea Institute for Health and Social Affairs (KIHASA), 2012)," of which I was the lead author. Professor Choi summarized the implications of the Swedish pension reform as follows: "I believe it would be desirable to appoint a special committee of experts encompassing an objective group, as Sweden did, and present solutions based on neutral research free from the influence of the government and political parties (page 430)."

The reason I am quoting a report from 12 years ago is that foreign experts who attended the 18th OECD Pension Experts Meeting were unanimously puzzled by Korea's pension discussion process. The point they cannot understand is, "How could such an important issue as pension reform be managed so opaquely?" They noted, "The private advisory committee of the National Assembly Special Committee on Pension Reform, which operated for over a year, does not even have proper minutes. Even the advisory committee members only found out the contents of the final report submitted to the Special Committee later through the media."

Members of the Public Deliberation Committee arbitrarily deleted content stating that "the difference in lifetime contributions between the generation born in 2005 (14.1%) and the generation born in 2035 (36.1%) reaches as much as 22 percentage points," which the Ministry of Health and Welfare had submitted as learning material for the citizen representatives of the Public Deliberation Committee under the National Assembly Special Committee on Pension Reform. Even after doing so, the rebuttal to my point during 'Jung Kwan-yong's Policy Debate (broadcast April 18),' a live debate on the National Assembly TV (NATV), that "material included and printed in the citizen representatives' learning materials was deleted and then reprinted for use as learning materials" is astonishing.

"I speak as a party participating in the Public Deliberation Committee. Such a thing absolutely did not happen. Can you take responsibility for statements that differ from the facts?" This is what I was asked several times on the live broadcast, as I was being pressed hard. Another member of the Public Deliberation Committee who appeared with us remained silent until the end. This scene can be verified through the National Assembly TV. The point that the citizen representatives were taught using learning materials from which core data that would greatly influence decision-making had been deleted was also a problem raised by former Representative Yu Kyung-jun, the ruling party secretary of the National Assembly Special Committee on Pension Reform.

Why do "the scenes of pressing me during the live broadcast, claiming such a thing did not happen" and "the appearances of many media outlets, the political sphere, and stakeholders putting all sorts of pressure to quickly pass in the National Assembly the plan that a majority of the citizen representatives chose to raise the income replacement rate by another 10 percentage points to 50%" overlap?

Even in this disastrous situation, it seems to be because there is still no government plan and the 22nd National Assembly is repeating the same claims as the 21st! Our current reality is that "it is difficult to even hope that they feel the minimum amount of shame for their actions"!

Source: Asia Today (original article)