According to government reports, one in two South Koreans will be elderly by 2025, with Seoul expected to be hit with the steepest decrease in economically active population over the next 30 years. (Image: Kobiz Media)
SEOUL, June 17 (Korea Bizwire) – Amid high youth unemployment rates, a rapidly aging population, and low birth rates, what will become of South Korea’s funds for health and pension is rapidly emerging as one of the most pressing social issues facing the country.
When a government report came out in March revealing that the country’s health insurance fund could be heading into a long term deficit and eventually run dry by 2023, the nation was sent into serious panic mode.
National health care spending is forecast to grow at an annual rate of 8.7 percent from last year, from 52.6 trillion won to a whopping 100 trillion won by 2024.
The National Pension Service (NPS) is also facing a funding crisis, as recent economic forecasts predict the number of national pension fund subscribers will begin to decline from 2019.
What further highlights the gravity of South Korea’s impending social care crisis is the decrease in the economically active population caused by a number of social issues, a demographic that has been the driving force of national social care funding.
According to government reports, one in two South Koreans will be elderly by 2025, with Seoul expected to be hit with the steepest decrease in economically active population over the next 30 years.
Another major factor behind the rapid aging of South Korean society is the record low birth rates, as 2016 figures suggest that the country’s birth rate was only 1.17 per woman.
Apart from concerns over the future, the NPS is also facing criticism over insufficient pension entitlements, which fall short of even a quarter of the average income earned by pensioners before retirement.
It was against this backdrop that the newly elected Moon Administration introduced a pension reform to raise the basic pension benefit to 300,000 won by 2021 this week. The basic pension benefit, which is available to those aged over 65 in the bottom 70 percent of the income scale, currently stands at 206,050 won, far below the estimated cost of living for elderly South Koreans.
Speaking to the press at a briefing held on Thursday, Park Gwang-on, the spokesperson of the special presidential advisory committee, said the government is set to propose a pension reform bill before the National Assembly in October that will see more than 21 trillion won pumped into raising the basic pension benefit over the next five years.
Amid high youth unemployment rates, a rapidly aging population, and low birth rates, what will become of South Korea’s funds for health and pension is rapidly emerging as one of the most pressing social issues facing the country.(Image: Yohap)
Earlier this year, welfare director An Do-gul of the Ministry of Strategy and Finance responded to growing concerns over the uncertainty looming over the future of social care funding, saying, “Necessary steps such as closing (health care) loopholes must be taken to reduce pension and health care spending before the national pension fund dries up.”
As a recent study published in The Lancet suggests the average life expectancy for both South Korean men and women will be the longest in the world by 2030, the government is now being urged to find new business models to support its pension and health funds, as the clock is ticking on the funding crisis in social care.
Hyunsu Yim (hyunsu@koreabizwire.com)
