Flawed OECD Estimates of Elderly Poverty in Korea (June 22, 2023)

According to research conducted by the author's team using the National Pension database, even within the same birth cohort—those born in 1970—the actual contribution period is projected to vary considerably by income level. When contributors to the National Pension born in 1970 are stratified by income, the expected contribution period for those in the lowest income decile is estimated at 19.4 years, compared with 33.9 years for those in the highest, tenth decile. These projections are derived by applying the current National Pension Act and assuming that pension contributions will continue to be paid only up to age 59, even fifty years into the future.

(omitted)

The claim that Korea has the highest elderly poverty rate among OECD member countries is also distorted. A comparison of various OECD indicators reveals that the reality underlying the high elderly poverty rate lies in the polarization of income and assets within the elderly population. Despite the fact that the degree of income and asset polarization within the elderly cohort is more severe than in virtually any other member country, the adoption of an average-based approach alone produces an optical illusion suggesting that the majority of older persons live in poverty. If assets are taken into account alongside disposable income—the poverty measurement standard used by the OECD—Korea's high elderly poverty rate could be dramatically reduced. The presentation by former Commissioner of Statistics Korea Ryu Geun-gwan (Professor of Economics, Seoul National University) at a joint forum co-hosted by the Korean Economic Association, the Korean Statistical Society, and Statistics Korea on June 5 also included findings indicating that elderly poverty rates could be lowered once the assets held by older persons are considered.

At the aforementioned OECD meeting, the author emphasized that both the short contribution periods in the National Pension and Korea's high elderly poverty rate stem from the trap of averaging. Andrew Reilly, the author of the relevant OECD report who was present at the meeting, raised no objection. Nevertheless, these issues have not been taken up for discussion in the National Assembly Special Committee on Pension Reform or in the National Pension Financial Estimation Committee. Only when these arguments are properly addressed will it be possible to expose the problems with proposals to uniformly raise the National Pension's income replacement rate and to increase the Basic Pension for all older persons. And yet, instead of evidence-based deliberation, Korean society continues to emphasize social consensus alone.

https://m.hankookilbo.com/News/Read/A2023062111050002708