"Elderly Poverty Rate to Fall to 20% by 2070... Basic Pension Should Be Reformed to 50% of Median Income"

Korea's High Elderly Poverty Rate Expected to Decline
Basic Pension Reform Needed to Alleviate Elderly Poverty
Eligibility Should Be Changed to 50% or Less of Median Income
"Annual Fiscal Savings of About 9.6 Trillion Won Possible"

As the economic status of the elderly population in Korea improves, there is a forecast that the country’s old-age poverty rate?currently the highest among OECD nations?will decline in the future. In light of this, there have been calls to adjust the eligibility criteria for the basic pension to those whose income is at or below 50% of the median income, thereby increasing fiscal efficiency while providing more substantial support to the impoverished elderly.

Lee Seunghee, a research fellow at the Fiscal and Social Policy Research Division of the Korea Development Institute (KDI), delivered a session presentation titled "The Current Status, Outlook, and Response to Elderly Poverty" at the KDI-Bank of Korea joint symposium held on the 15th in the main conference room of KDI in Sejong City. The event, held under the theme "Poverty and Labor in a Super-Aged Society: Asking the Policy Direction," aimed to diagnose the status of elderly poverty and the labor market for the aged in the context of a super-aged society and to explore effective policy responses.

Lee explained, "The high elderly poverty rate in Korea (38.2% based on disposable income in 2023) is attributable to several factors: rapid economic growth, the resulting increase in heterogeneity among the elderly, and the consequent rapid changes in social systems and widening economic disparities within the elderly population." In particular, he pointed out, "The poverty rate is especially severe because the cohort born before 1950?who did not benefit from the fruits of economic growth?has a high poverty rate."

On the 15th, attendees are taking a commemorative photo at the KDI-Bank of Korea joint symposium held in the main conference room of the Korea Development Institute (KDI) in Sejong Special Self-Governing City, under the theme "Poverty and Labor in a Super-Aged Society: Asking the Policy Direction." Provided by KDI

He stated, "The generations that will enter old age in the future are those born in the 1960s and 1970s, and their economic status is generally better than those born in the 1930s and 1940s." He added, "As less impoverished generations enter old age and the trend of low economic growth continues, the median income will increase slowly, which could prevent a rapid rise in the elderly poverty rate going forward."

From a long-term perspective, Lee argued that the elderly poverty rate will continue to decline. He noted, "According to long-term forecasts using a deep learning franchise model, the elderly poverty rate is expected to fall to around 30% by 2050 and to about 20% by 2070."

As the elderly poverty rate decreases, Lee also argued for the need to improve the basic pension system, which is designed to alleviate elderly poverty. He explained, "In 2015, the income threshold for the bottom 70% of the elderly was set at or below 50% of the median income, but over just 10 years, this threshold has rapidly increased and now reaches about 95% of the median income."

He pointed out, "If this trend continues, by 2028 the basic pension eligibility threshold will match the median income, and after that, even elderly individuals whose income exceeds the median will be eligible for the basic pension." He warned, "Ultimately, this could result in a situation where poor young and middle-aged people, whose income is below the median, are forced to fund the basic pension for wealthier elderly individuals."

Lee emphasized, "If the eligibility criterion is gradually reduced and limited to elderly individuals at or below 50% of the median income, it would save approximately 9.6 trillion won in annual fiscal spending." He also mentioned, "If the current system is maintained, the per-capita burden on the working-age population in 2070 will be about 2.5 million won, but if the threshold is switched to 50% of the median income, this will drop significantly to around 1.3 million won."

Furthermore, he stated, "If the eligibility threshold is gradually transitioned to 50% of the median income, even if the pension payment is immediately increased by 447,000 won, the cumulative fiscal expenditure required by 2070 will remain the same." He stressed the need to shift support toward those elderly who are in urgent need of help, advising, "It is desirable to provide more substantial support, limited to the impoverished elderly."