Over the Past Decade, Pension Has Played a Key Role in Reducing Elderly Poverty

National Pension Research Institute, 2023 Pension Issues & Trend Analysis Report No. 95
Analysis of Elderly Poverty Conditions and the Poverty Reduction Effect of Public Transfer Income

Over the past decade, public transfer income has significantly contributed to reducing elderly poverty among those aged 65 and older. Public transfer income refers to government-supported funds such as the National Pension and Basic Pension. Although the proportion of income earned by the elderly from the market decreased during the same period, increased government support through pensions and other assistance led to a reduction in absolute poverty.

According to the report titled "Pension Issues & Trend Analysis - The Reality of Elderly Poverty and the Poverty Reduction Effect of Public Transfer Income" by the National Pension Research Institute of the National Pension Service on the 28th, the elderly poverty rate for those aged 65 and above dropped sharply from 46.5% in 2011 to 38.9% in 2020 based on disposable income, a decrease of 7.6 percentage points. Compared to the overall population poverty rate, which fell from 18.6% in 2011 to 15.3% in 2020, a decrease of 3.3 percentage points, the reduction in elderly poverty was more pronounced. The poverty rate refers to the proportion of people whose income is below 50% of the median income (relative poverty line).

The poverty gap also decreased from 21.06% in 2011 to 12.48% in 2020, a reduction of 8.58 percentage points. The poverty gap indicates how much income those below the poverty line need to escape poverty; the lower the average income of the lower-income group, the larger the poverty gap.

The report highlighted that the share of public transfer income in the elderly's income composition increased from 19.2% in 2011 to 29.4% in 2020, a rise of 10.2 percentage points. This is notable because the poverty rate based on market income for the elderly actually increased during the same period. An Seo-yeon, a senior researcher at the National Pension Research Institute who authored the report, explained, "The poverty rate based on market income rose from 56.9% in 2011 to 58.6% in 2020," emphasizing the importance of focusing on the poverty reduction effect of public transfer income.

The analysis particularly found that the Basic Pension and National Basic Livelihood Security benefits had a significant impact on reducing the poverty gap. The nearly twofold increase in Basic Pension benefits between 2011 and 2015 contributed to the decrease in the poverty gap. According to the decomposition of the poverty gap by income source by year, the contribution of public pensions to reducing the poverty gap increased from 9.8% in 2011 to 16.14% in 2020, while the impact of the Basic Pension on reducing the poverty gap rose from 5.46% in 2011 to 11.19% in 2020.