[Yun Suk-myung Column] The Public Deliberation Committee's Deterioration of the National Pension Must Stop Here (May 12, 2024)

(It is understood that, once the full story of how this column came to be written

had been conveyed accurately to a senior People Power Party lawmaker,

the Yoon Suk-yeol administration declined to accept the outcome

of the dysfunctional pension overhaul deliberations then conducted

under the name of

the Public Deliberation Committee.)

The Public Deliberation Committee under the National Assembly Special Committee on Pension Reform (hereafter the "Public Deliberation Committee") says it intends to race ahead with no brakes.

Even though Yoo Kyung-joon, the People Power Party's secretary on the special committee, has officially stated that the effort to reach an agreed proposal in the 21st National Assembly had fallen through,

the chair of the Public Deliberation Committee has said he will get an amendment to the National Pension Act passed within the 20 days that remain.

The First Vice Minister of Health and Welfare said the embers have not yet gone out.

On the 9th, the President held a press conference proposing that, since ample time is needed to carry out pension reform properly, the matter be handed to the 22nd National Assembly for deliberation. In return, he declared that he would without fail put forward a reform plan within his term.

Kim Sung-joo, the Democratic Party's secretary on the special committee, says that "the President threw ashes over a pension reform that was all but done," and vows to pass it in the 21st National Assembly.

The author has strongly criticized the conduct of the presidential office and the Ministry of Health and Welfare, which for the past two years have looked on as bystanders.

This is because, although the Minister of Health and Welfare had repeatedly declared that a parametric reform plan (an adjustment of the contribution rate and the income replacement rate) would certainly be put forward, the government did not so much as produce a plan — the very height of irresponsibility.

That matters have come to this pass can likewise be called a catastrophe brought on by the key aides in the Office of the Senior Secretary to the President for Social Affairs, who advised the President at close quarters, and by the conduct of a Ministry of Health and Welfare that was not free of that influence.

Though it comes belatedly, the presidential office has at last made the right judgment.

The author cannot say whether this was the judgment of the newly installed Chief of the Policy Office at the presidential office, but on the single point that the judgment was sound he wishes to give high marks.

In November 2022 the author had an opportunity to brief Prime Minister Han Duck-soo on the direction of pension reform.

Back in 2001, when the author took part in an OECD EDRC meeting as a pension expert, Han Duck-soo, then the Ambassador to the OECD, called him into his office.

"The OECD here is a fierce diplomatic arena. The national interest is at stake, so I ask you to handle it well" — that was his charge. Perhaps because the author had mentioned this personal connection, the Prime Minister, busy as he was, postponed his schedule and heard the author out in full.

On that occasion the author stressed that "in the pension field, viewed from the standpoint of preparing for the future, we are among the most backward countries in the world, and if we continue down this road, even the survival of the state will be in doubt."

The reason for bringing up this connection with the Prime Minister again now is that

in substance this Public Deliberation Committee's plan to overhaul the scheme is a deterioration plan that could even lead the country to ruin, and yet it is being passed off as a reform plan.

Behind this judgment lies the finding that "even if the income replacement rate is held at 40% while the contribution rate, currently 9%, is raised by a further 6 percentage points to 15%, fiscal stabilization would still be difficult to achieve" —

a finding that comes from the 2023 fifth National Pension financial projection.

And even that result rests on extremely optimistic population assumptions.

This is the background to the denunciations boiling up in young people's online communities, which call the decision of the Public Deliberation Committee's citizen representatives "the result of locking 500 people up and gaslighting them."

There were many flaws in the way the Public Deliberation Committee was run.

Distorted rule-setting deprived the citizen representatives of even the chance to hear about the fiscal stabilization measure that experts most favor.

The Committee is forfeiting its legitimacy because that rule-setting forced a choice between only two options, both of which would in the end wreck the National Pension.

The reason the citizen representatives were put through a learning process was to understand the difficult reality the pension faces and to grasp what genuine reform would require.

The group of experts who would have conveyed the indispensable core information properly was excluded from the advisory group of the agenda deliberation panel, and the public deliberation went ahead without even telling the citizen representatives of the minimum reform needed to keep the pension scheme alive — on those grounds it can be said that the public and the press were deceived.

The Public Deliberation Committee even had the effrontery to delete the learning materials for the citizen representatives that the Ministry of Health and Welfare had submitted.

One Public Deliberation Committee member, appearing as a panelist on a live debate on which the author also appeared, browbeat the author, saying that this criticism was not true and demanding to know whether he was prepared to take responsibility for it.

Another Public Deliberation Committee member, who appeared on the same program, kept silent to the end even then.

Yet after the broadcast, in response to a question from Representative Yoo Kyung-joon of the National Assembly's special committee, that member stated: "I agreed to the deletion of the material because I took the view that it could be replaced by other material already submitted."

This is why it is hard to grant any legitimacy to the Public Deliberation Committee's deliberation process or to its outcome.

"The gap in the lifetime National Pension contribution rate burden between the generation born around 1960 and the generation to be born in 2035 is as much as fourfold."

That is the passage deleted from the citizen representatives' learning materials submitted by the Ministry of Health and Welfare.

The reason the citizen representatives were put through that learning process was so that, speaking for those aged 18 and under who have no right of representation and for generations not yet born, they might seek out a desirable direction for pension overhaul.

Can something this important be treated as information that a handful of people on the Public Deliberation Committee may delete at their own discretion? It cannot.

The Public Deliberation Committee's debate is "the very picture of haggling over the price of fish in a fish shop." That is precisely the level at which it is being conducted.

The alternative that some media outlets are pressing for acceptance as a compromise is "the combination of a 44% income replacement rate and a 13% contribution rate."

It is an overhaul plan that imposes a burden 8.8 percentage points below the 21.8% contribution rate that would balance contributions and benefits.

In the early years of the overhaul, the 4 percentage points of additional contribution revenue create the optical illusion that fiscal stabilization has been achieved; but because far less is collected than the balancing contribution rate requires, the unfunded pension liability grows steeply as the years pass.

That is why it is criticized as a deterioration plan that only adds to the burden on future generations. If its authors truly believe this overhaul plan is a reform plan for future generations, let them begin by disclosing how much it will increase the unfunded liability.

Should they disguise a deterioration plan as a reform plan and try to pass it in the 21st National Assembly, they will face a severe reckoning from the public.

The Pension Future Forum, to which the author belongs, has

already demanded, on three separate occasions,

that the many suspicions raised in the press be answered by the Public Deliberation Committee itself, and not through the mouths of civic organizations or of a few politicians.

If the Committee truly believes that the deterioration plan it is pushing is a reform plan,

then a public accounting for the problems that numerous media outlets have raised must come first.

While the author was writing this column, a call came from Kim Il-cheon, a former Director-General of the Ministry of Health and Welfare.

He said it was hard to watch our pension reform debate, so far removed from international trends.

These are the words left to the author by a man who is 90 years old this year.

"Since 2020, Japan has been reworking every part of its social security system so as not to burden later generations."

Japan, the country from which we learned our pension system, has integrated its national pension and its government employees pension,

and with an 18.3% contribution rate its income replacement rate stands at 33–34% (the average pension under the scheme introduced in 1942 is 1.29 million won).

And so, even 100 years from now, there is 200 trillion won (in present value) with which to pay pensions.

Even though this is the reality abroad, if they overreach and try to pass a deterioration plan in the 21st National Assembly, the harm that the handful of people leading the Public Deliberation Committee have done to our society over the past 25 years is likely to come to light of its own accord.

※The views expressed in this column may differ from those of this newspaper.

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

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