(Column 2 That Provided the Basis for Introducing the Basic Pension. OhmyNews, November 6, 2005) Co-Representative Oh Gun-ho (Posted September 8, 2026)
(As of the second half of 2026,
the most contested issue
in pension reform is
the introduction of the Basic Pension,
and what set it in motion was the
November 6, 2005
column by Co-Representative Oh Gun-ho
in OhmyNews.)
'The Basic Pension System': Find the Real Stem Cell
Is the National Pension truly a welfare system for workers and ordinary citizens? Is it a social insurance program worth our defending?
If one works within the progressive camp, at the very least one ought to defend the National Pension as a pillar of social welfare — yet the more I learn about the National Pension, the more I hesitate over this question than before.
It is not because subscribers to the National Pension lose out. On the contrary, subscribers are receiving ample 'benefit.' Readers will not readily accept this, but for workers the National Pension's benefit-to-contribution ratio averages more than five times that of private insurance.
If one pays 100 won into private insurance, one gets back about 80 won in old age; with the National Pension, the 100 won paid in by the employer is added to make a principal of 200 won, and the total pension paid out later exceeds 400 won. Even regional (self-employed) subscribers, who pay the entire 9% contribution themselves, receive 200 won, so private insurance is no comparison.
The National Pension draws resentment because participation is mandatory, but for ordinary citizens who have no respectable old-age assets and cannot afford the high contributions of private insurance, it is, if nothing else, unquestionably the most advantageous system for preparing for old age.
Why I Pick a Fight With It Even Though It Pays Back More Than Private Insurance
The fundamental reason I harbor doubts about the National Pension is that far too many ordinary citizens are left in the coverage gaps of the National Pension. Of the 8.4 million non-regular workers, 5.64 million — 67% — are outside workplace-based National Pension coverage, and half of regional (self-employed) subscribers have fallen into the status of exempted non-payers who will be unable to receive a pension later on.
The National Pension offers generous benefits to those who are insured, but confers no benefit whatsoever on those who are not. The uninsured are non-regular workers and small-scale self-employed people who hold a disadvantaged position in the labor market. They are in a situation where they experience the polarization of the labor market while young, and must bear the polarization of pension benefits once old.
If I had to name one achievement of the past three years of National Pension controversy, it would be this single point: that we have discovered the coverage gaps and begun to search for solutions to them. The National Pension amendment bill, which had dealt with adjusting the benefit rate and contribution rate for existing subscribers, has turned its attention to measures for resolving the coverage gaps. This is truly a tremendous leap forward. If the National Pension can incorporate support measures for the uninsured, I will go around promoting the National Pension with a light heart.
The people currently left in the coverage gaps are those who cannot afford to pay pension contributions. That is why the answer is a Basic Pension that pays a fixed old-age living benefit to any older person, regardless of whether they were able to pay contributions. The Basic Pension is a system already implemented in many Western welfare states.
The government, too, had opposed it, saying that "the Basic Pension is a scheme that costs astronomical sums," but last June it abruptly proposed a Basic Old-Age Pension through Yoo Si-min, the Minister of Health and Welfare, and recently a bill was introduced by Uri Party lawmakers (it is not yet the official party line, but since it is an amendment bill signed by 78 members, it will hereafter be referred to as the government–ruling party plan).
If the Coverage Gaps Are Resolved, I Will Promote the National Pension
At present, the National Assembly has before it both the government and ruling party's Basic Old-Age Pension bill and the Basic Pension bills of the Grand National Party and the Democratic Labor Party.
The government and ruling party's Basic Old-Age Pension is a plan to pay 70,000 to 100,000 won a month, from 2007, to 60% of those aged 65 and over. If one applies the concept of the pension's benefit rate (benefit amount divided by the average income of subscribers), this amount comes to around the 5% level.
In exchange, the National Pension's benefit rate is lowered to 50%. The Basic Old-Age Pension is projected to cost 2.2 trillion won in its first year of introduction, and the government's policy is to secure these funds by cutting special tax reductions and exemptions (tax expenditures) and by economizing on budget expenditures.
By contrast, the opposition's Basic Pension bill includes not only older people but also people with disabilities among those eligible for payment. Its target benefit rate is also higher — 15% under the Democratic Labor Party's bill and 20% under the Grand National Party's bill. In won terms, that comes to 240,000 won and 320,000 won a month, which is tremendous news for those of us who have lived under a fragile system of social welfare.
Likewise, as the Basic Pension is introduced, the National Pension's benefit rate is lowered to 40% under the Democratic Labor Party's bill and to 20% under the Grand National Party's bill. From here, let us carefully examine each plan's approach to the coverage gaps.
The government and ruling party's Basic Old-Age Pension starts out with a benefit rate of 5%, but this gradually declines. Because the amount is raised each year only by the rate of inflation, when it is set against average income, which rises at a higher rate, the benefit rate cannot but fall further and further over time. If future inflation is assumed at 3% a year and income growth at 6%, the Basic Old-Age Pension's benefit rate will be a mere 2% or so around 2030.
In today's money, that is 40,000–50,000 won. In the end, the Basic Old-Age Pension is a scheme that makes a show of generosity for now but gradually dies out, and it has no standing as a measure for resolving the coverage gaps.
The Grand National Party proposes a Basic Pension with a benefit rate of 20%, higher even than the Democratic Labor Party's. This Basic Pension would start in 2006 at a benefit rate of 9% (140,000 won) and reach 20% in 2028. The cost in its first year of introduction would be 9.5 trillion won (4.8 trillion won even when the 2-percentage-point cut in the National Pension contribution rate is netted out, as the Grand National Party argues), and by 2030 the fiscal requirement would reach 5.5% of GDP.
A high Basic Pension amount is welcome, but there is no funding plan whatsoever, which is preposterous. What is more, the Grand National Party has been arguing for tax cuts all along.
The Democratic Labor Party's plan is a "frugal Basic Pension" that reduces the fiscal requirement to 56% of what the Grand National Party's plan would need. It eases the target benefit rate to 15%, does not pay the Basic Pension to the top 20% of older people by income, and reduces the amount when a couple both receive the Basic Pension at the same time. In its first year of introduction it would cost 3.5 trillion won (2.9 trillion won excluding the disability pension), and by 2030 it would require funding equal to 2.9% of GDP.
"National Pension Reform = Tax Reform"
All three plans speak of resolving the coverage gaps. But the government–ruling party plan is an 'extinguishing cell' that makes a small show of generosity now and then disappears; the Grand National Party's plan is a 'fake cell' that cannot survive in a tax-cutting party; and the Democratic Labor Party's plan is, in effect, a 'stem cell' that starts at 5%, much the same as the government–ruling party plan, but grows to 15% over twenty years.
The task that remains for the Democratic Labor Party's Basic Pension is securing the funding for the future. Frugal as it is, 2.9% of GDP in 2030 (51 trillion won at constant prices) and 4.2% in 2070 (104 trillion won) would have to be covered out of the government budget. That is why I often say that "National Pension reform is precisely tax reform." Is it really true that our society will be unable to bear this cost in the future?
Let us not forget that the older population will grow rapidly in our future. Fiscal spending for old age is unavoidable. In 2000, average public pension spending in the OECD countries was 7.2% of GDP, and the average for the 15 EU countries was 10.4%. The future fiscal requirement of the Democratic Labor Party's plan, including both the Basic Pension and the National Pension, is 5.3% in 2030 and 9.4% in 2070 (10.9% for the Grand National Party). There is no reason we should not reach today's European level seventy years from now.
In 2004 Korea's national burden ratio (taxes plus social insurance contributions as a share of GDP) was 25.3%, fully 11 percentage points short of the OECD average of 36.3%. Converted into money, that amounts to nearly 90 trillion won. Why is it that on the state's finances alone the government does not speak of the global standard?
The Democratic Labor Party's Basic Pension plan and fiscal reform plan amount to nothing more than a proposal to bring Korea's abnormally small fiscal scale up to the level of OECD member countries — and even that, over the course of several decades.
▲Committee Member Oh Gun-ho
It is now time to bring the National Pension controversy to a close. The political sphere and contributor organizations alike are calling the resolution of the coverage gaps the core task of pension reform.
But let us look past the token, look-how-generous-we-are Basic Old-Age Pension that dies out in the future and the fake Basic Pension that cannot be reconciled with the case for tax cuts, and turn our attention to the frugal Basic Pension. And let us shift the energy our society has poured into the National Pension over to tax reform. The more the pension controversy is repeated, the deeper public distrust grows; the deeper the tax controversy goes, the healthier our society's finances will become.
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