firmly in place has been confirmed through an abundance of historical evidence.
Common Concerns of Aging Societies, Social Security Funds
Global Concern, ‘Reform in Social Security Pension'
Recently the social security pension issue is emerging as a hot potato among the world's main countries, including the US and the EU, as well as Korea. Even though each country holds differing attitude toward the issue, the social security pension issue is sensitive enough to determine the public opinion of voters, and accompanies huge reforms in the whole country.
Pension reform is the general tendency in the EU as well. 2 years ago, France passed a pension reform bill despite intensive protest by workers. At its heart, the bill had an extension of the pension payment period, an increase in the payable amount, and reduction in return amount. Other European nations including Germany also have carried out large-scale reform as their pension systems were mired in financial problems and chronic deficiencies. Japan which has already become an aging society is also reconsidering its social security system today.
Europe has been a collection of advanced nations with advanced social security systems. The laborers and elderly have enjoyed all sorts of benefits and privileges through worker preferential policies which provide diverse benefits for laborers working a minimum of 35 hours a week, such as wealth division, medical insurance and diverse social security benefits.
Yet, such benefits and institutions will give rise to financial deficiencies in governments without economic growth. The rapidly aging populations of these countries will make it especially difficult to sustain the current social security system. Now, ‘from cradle to the grave" has become just an old saying.
President Bush's Concern, ‘Reform in Social Security Pension'
President Bush, the leader of the world's top superpower, made a startling comment during his State of The Union address on February 2nd when he commented, "With this rate, American social security pension will go into bankruptcy." He added that pension expenditures would dramatically exceed income, driving the system into deficit in 2018 and making the system itself collapse in 2042. Moreover, he made a commitment to all-out reform in the social security system as the top domestic priority during his second term. Why did he make an issue of the social security pension reform upon taking power?
Today, about 45 million Americans are entitled to a social security pension. While 16 Americans paid social security pension for 1 retiree in the past, now 3 people have taken over the task. Possible solutions to the problem include raising taxes, running into debt, reducing pension amounts, and raising the pension-entitled age. However, the problem is that no one can put them into operation. As a result, privatization of pension has been proposed as the Cato Institute or Heritage Foundation has advocated.
The countermeasure that President Bush came up with is to allow a portion of social security taxes paid by workers to be invested in stocks, bonds, or private accounts including CDs starting from 2009, and to regard it as private property, enabling its inheritance. He wanted to reduce the national burden by enabling people to receive enough profits after they retired. In short, he suggested a new pension system where certain individuals can personally invest some of their taxes to gain higher returns, with the caveat that they should bear any loss caused by faulty investments as well. Additionally, the government will share the burden on an equal basis.
Under this countermeasure, workers are expected to receive lower pensions as they are paying less social security taxes to the government. Although pension benefits to retirees will be obviously reduced, President Bush made no comment on how to repay the amount which was diverted to private accounts. Politicians cannot come clean before 'voters like a king'. President Bush stressed that those who are 55 and over still could receive the existing benefits. Yet, it is to be seen whether his promise will fulfilled in the long run. Voters in their 50s and 60s in America have the highest voting rate. If his Republican Party fails to win their confidence, it may lose in the next general election, as well as the next presidential election as well.
National Pension Reform in Korea
Currently controversy has arisen about the national pension system reform in Korea as well. Some say Korea also will see its pension fund in deficit by the late 2040s. Under the national pension introduced 17 years ago, payers in arrears with payment accounts for around 28%, and the elderly denied of pension benefits will reach 60%.
Although there are the so-called National Basic Livelihood System, an Old-Age Pension, Retirement Pay and Special Pension by Occupations, they are not sufficiently helpful to most of the elderly population. The current average national pension hovers around 200 thousands won, bringing about an intensive dispute on the "allowance-level pension" during the last election period. Besides, special pensions, such as the Public Servant Pension, Military Pension and Private School Teachers' Pension, are determined according to position and working period, but some classes can receive higher than average salary of Korean workers, which is likely to bring about a problem in the future. In the sense, some suggest a Pension Peak System or a revision to the deficient Military Pension. It is advisable to reach an agreement regarding pension reform by efficiently investing pensions in institutions warranted by the government, studying privatization of pension, and winning public confidence with low burden and high returns.
As seen in the EU, it is advisable to make sure of the adequacy of pension amounts and the sustainability of the system, and to develop the system so as to cope with rapidly changing social environments. The system should provide Korean retirees with a practical pension amount through which allows them to maintain their dignity to the last moment. The pension issue will continue to plague Koreans as a major reform task unless Korea, which will become a super-aging society due to its low birth rate and low growth in the past 2 decades, accomplishes further economic growth.
Ju Myeong-ryong (Chairman of KARP, Former Chairman of New York Korean Association)