BOK Governor Calls for Asset-Based Reforms to Boost Senior Incomes (Image supported by ChatGPT)
SEOUL, May 15 (Korea Bizwire) — Assisting senior citizens in liquidating their assets is essential to addressing elderly poverty, which, in turn, may help boost local spending, the chief of South Korea’s central bank said Thursday.
Bank of Korea (BOK) Gov. Rhee Chang-yong made the point during a symposium co-hosted by the BOK and state-run think tank Korea Development Institute (KDI), aimed at exploring policy responses to the growing challenges of elderly poverty and labor market conditions.
As of December 2024, South Korea has officially entered a super-aged society, with more than 20 percent of its population aged 65 or older.
“The issue is not only the rapid pace of aging, but also the fact that it is accompanied by poverty. The elderly poverty rate in South Korea stands at around 40 percent, the highest among the member countries of the Organization for Economic Cooperation and Development (OECD),” Rhee said.
Bank of Korea (BOK) Gov. Rhee Chang-yong bangs the gavel to open a Monetary Policy Committee meeting at the central bank in Seoul (Image courtesy of Yonhap)
The figure refers to the relative poverty rate, based on disposable income rather than assets.
If senior citizens convert their assets into annuities, the elderly poverty rate could drop to 23.5 percent, Rhee stressed, adding that around 40 percent of homeowners aged 55 and older have expressed their interest in enrolling in a reverse mortgage.
“By utilizing reverse mortgage, an annual cash flow of approximately 35 trillion won (US$24.96 billion) could be generated. Even if only half of this amount is spent, it could lead to an increase of over 17 trillion won in private consumption each year,” Rhee said.
Rhee also highlighted the grim reality of many senior citizens involuntarily participating in the labor market due to insufficient income. The labor force participation rate among those aged 65 and over in South Korea is twice the OECD average.
Particularly worrisome, he noted, is that a large number of senior citizens have turned to self-employment, especially in such vulnerable sectors as food service and transportation, where they face low profitability and high income instability.
“The situation raises concerns not only about their personal financial stability, but also about the broader impact of the macroeconomy. It is needed to reduce the influx of elderly workers into self-employment and to expand opportunities for stable wage employment,” Rhee said.
Rhee proposed extending the retirement age as a necessary measure, while emphasizing the importance of increasing flexibility in the wage system to minimize the negative impact on youth employment.
(Yonhap)
