The Government Employees Pension Agreement — Toward Conditional Approval

[Seoul Economic Daily · Op-Ed · May 20, 2015]

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

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

The presidential office's Senior Secretary for Political Affairs stepped down following the failure to process the Government Employees Pension agreement. It is the second such resignation, after that of the Minister of Health and Welfare, who stepped down when the National Pension amendment bill was voted down under the Participatory Government. While this agreement carried weight in that it was derived from discussions by the Grand Compromise Body, society's evaluation was cold. Part of the problem is that it is a weak reform plan lacking a fundamental prescription, but it also seems to be because people judged that while they were told to fix the Government Employees Pension—which is in critical condition—the negotiators did not properly fix the Government Employees Pension and instead tried to divert attention by bundling in the National Pension.

Utilizing the Experience of the '2007 National Pension Passage'

The agreement lacks benefit cuts sufficient to achieve fiscal stabilization, and because it provides a long implementation period of 20 years, the intensity of the reform has dropped significantly. It is also problematic that the vested interests of long-term employees and pension beneficiaries—the primary causes of fiscal instability—were barely touched. Because senior civil servants, who contribute less than junior civil servants yet receive far more in pensions, were not properly addressed, the burden will be passed entirely to junior civil servants and the public. This has resulted in fueling another time bomb: intergenerational conflict within the civil service society.

This pension reform discussion, in which the National Assembly stepped in due to controversies that three previous reforms were "self-reforms," did have some achievements. By putting the pension discussion to public deliberation, it provided an opportunity for issues related to the Government Employees Pension, which had been managed opaquely, to become more transparently known. However, one must not overlook the fact that since the working group that drew up the compromise consisted only of stakeholders from the Government Employees Pension and the Private School Teachers Pension, the structure of the discussion actually regressed compared to previous reforms. In previous reforms, although they were a minority, there were neutral experts who emphasized the need for Government Employees Pension reform from the public's perspective. Because such experts were excluded from the reform discussions, a reform far removed from the public's expectations emerged. In any case, it seems this is no time to be self-congratulatory about the agreement derived through the Grand Compromise Body. Since the agreement was reached with great difficulty, something will have to be passed on its basis one way or another, but additional efforts to meet public expectations appear inevitable.

My consistent view is that it would be better not to pass the ruling and opposition parties' agreement, but in that case, it would be difficult for the Government Employees Pension issue to move forward even one step; in that respect, I wish to propose an alternative.

I propose to pass the agreement by nullifying the part linked to the National Pension, while adding supplementary provisions. This means utilizing the experience of passing the National Pension and the Basic Old-Age Pension in 2007.

Reform Must Progress by Adding 'Subsequent Supplementation' Provisions

The idea is to pass the problematic agreement but attach a condition to create a social body that will address the problematic parts and take appropriate measures. This means adding a provision to overhaul the agreement to increase the contribution of long-term employees and beneficiaries to fiscal stabilization, as well as addressing the 20-year implementation period that is being heavily criticized.

The reason this agreement is being criticized is that the voices of the public were not reflected, and most of the stakeholders' claims were accepted. It was proven once again that as long as this pattern continues, neutral reform discussions are impossible. This is due to the collective agreement (Article 39 of the 2007 Collective Agreement) stating that Government Employees Pension reform must be consulted with the stakeholders. I believe we should carefully examine whether pension reform issues are subject to collective agreements on this occasion.

In human terms, the Government Employees Pension is a critically ill patient rushed to the emergency room. It is not in a position to interfere with the National Pension, which has barely begun to breathe after a difficult surgery involving bone-cutting pain. Most of the public simply hopes that the Government Employees Pension will be revived; they do not seem to want the National Pension dragged into it. I hope for a wise decision that considers these public sentiments.

Source: Seoul Economic Daily (original article)