An Assessment of the Research "Adequacy of Old-Age Income Security and the Current State of Elderly Poverty in Eight European Countries and Korea" (February 2025)

(The principal contents of the attached report

appear to reflect an altogether preposterous state of affairs that arises because specialists in social welfare fail to understand how public pension schemes operate!

Because Dr. Yeo Yu-jin, who authored this report, is known as a researcher with a strong track record,

these erroneous claims appear to be spreading through the media.

And this, no less, is happening through the Korea Institute for Health and Social Affairs (KIHASA), a government-funded research institute!

That this research, in relation to the National Pension amendment bill's

passage through the National Assembly,

was published amid intensely fierce political debate on

February 24, 2025, also, in terms of its timing,

appears likely to become a source of controversy in due course!

The problems this research entails

will be set out below, organized around the principal keywords.)

The problems with this report are as follows.

1. The report fails to distinguish differences in the historical introduction of pension systems across the countries under comparison—that is, differences in system maturity between schemes.

(This is because it simply compares the pension systems of countries whose schemes have histories of more than 100 years with those of countries that emerged only after the Second World War. This is largely a problem attributable not to the systems themselves but to differences in system maturity.

It should also be noted that, among Korea's elderly—and especially among the late-elderly aged 80 and over, whose poverty rates are particularly high—the majority of National Pension beneficiaries are

recipients of the special old-age pension, who draw benefits after contributing for only five years!)

2. The report gives no consideration whatsoever to the dimension of cost burden.

(Among the countries included in the comparison, Italy's contribution rate exceeds 30%.

France, too, carries a very high burden.

Finland's contribution rate alone exceeds 24%, and once the state contribution is factored in, it approaches 30%.)

3. The report makes no comparison whatsoever of the structural design and operating principles of the National Pension, the contributory pension scheme that constitutes the backbone of the system.

(Unlike Korea's scheme, the contributory schemes that form the backbone of the comparison countries operate as 100% earnings-related pensions,

and, unlike Korea's National Pension, the fact that there is no great gap between participants' own earned income and the income recognized for pension purposes is also a very important point.)

4. The report fails to properly compare the role of the non-contributory Basic Pension.

(Unlike Korea's Basic Pension, which is distributed quasi-universally on a per capita (1/n) basis,

and, moreover, unlike the Netherlands, where

the Basic Pension is the sole public pension,

the comparison countries operate basic pension or minimum income guarantee schemes centered on vulnerable elderly populations.)

5. Among the countries included in the comparison, the Netherlands has an overwhelmingly high share of privately operated retirement pensions.

In the case of Korea,

in the OECD and other international comparisons,

the retirement pension is omitted altogether.

This is so even though, unlike the National Pension, the retirement pension is a scheme requiring contributions of 8.33% with no income ceiling.

6. The report also fails to consider the fact that, relative to income levels, Korea's disposable income is very high compared with the countries under comparison(as a result of which, measured against median income, the elderly poverty rate inevitably appears far higher in Korea than in the comparison countries), as well as

the fact that an extreme polarization of disposable income is emerging within the elderly population itself.

One of the principal reasons Korea's disposable income is higher than that of the comparison countries is that

the burden of social insurance contributions, such as the National Pension, amounts to less than half that of the comparison countries.

In conclusion,

because this report is grounded in flawed comparisons and analysis,

its content could be exploited by groups seeking to distort, to an extreme degree, the direction in which Korea's public pension system should develop.

Above all,

this appears to be a methodological failing typical of social welfare specialists,

namely equating the operating principles of

other social welfare programs, in which expenditure and the benefit-disbursement effect occur simultaneously, with those of public pensions, including the National Pension— a phenomenon that, it seems, arises from precisely such conflation!

In particular,

the high elderly poverty rate that Korea is experiencing

is also partly attributable to the absence of an appropriate indicator for measuring the elderly poverty rate.

Please refer to the materials presented by Dr. Lee Seung-hee of the KDI at the advisory committee of the 22nd National Assembly Special Committee on Pension Reform.

These are already posted in the Pension Future Forum's resources category.

(The following is a portion of the relevant article.)

"In the midst of a dramatic demographic upheaval marked by ultra-low birth rates and rapid aging, Korea's old-age income security system stands at a crossroads for its very survival.

According to the report 'Adequacy of Old-Age Income Security and the Current State of Elderly Poverty in Eight European Countries and Korea,' published by the Korea Institute for Health and Social Affairs, the poverty rate among Korea's elderly reaches up to nine times that of major European welfare states, and the income-maintenance function inherent to pensions has effectively been paralyzed."

 

(Attached are the site of the media article that reported on the contents of this report, together with the report itself.

The report and Dr. Lee Seung-hee's presentation materials for the Pension Reform Special Committee advisory committee are attached as files.

Also attached is the elderly-poverty-rate report published by the Korea Institute for Health and Social Affairs in 2017, based on the Alkire-Foster multidimensional approach.

This is because Dr. Lee Seung-hee of the KDI referred to this report at the National Assembly Special Committee's advisory committee. According to that report, when a multidimensional analytical method is applied, Korea's elderly poverty rate

drops sharply to around 20%!)

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