The author is a senior columnist at the JoongAng Ilbo.
The world's lowest birth rate and fastest aging have caused a hemorrhage in Korea's national pension. The pension is post-retirement social security. But the system has been impaired with fewer working people and more retirees. At this rate, the pension fund will completely run out in 2055, a year when those born in 1990 become 65. If the current pension system is to be maintained, the premium rate should be raised to 30 percent of income by 2060 from 9 percent today.
Some of the younger population have started to demand the national pension be scrapped. Instead, they prefer individual liability for old age. Even with pension benefits, Korea's poverty rate in the older population is 37.6 percent, nearly tripling the average of developed countries. Both the young and old are seriously asking what the country exists for if it cannot protect their future.
President Yoon Suk Yeol vowed to undertake the long-deferred — and hugely unpopular — pension reform and complete a sustainable roadmap by the end of his term or by the early period of the next administration. If he really keeps his word, he would be initiating what no other president has attempted to do.
Jeon Byung-mok, chairman of a committee for fiscal projection for the National Pension Service, answers questions from reporters in the briefing room of the Seoul Government Complex, Jan. 27. [YONHAP]
The national pension was started in 1988 under the Roh Tae-woo administration with the aim of taking three percent of income and taking 70 percent of income after retirement. Since the adjustments in 1998, the premium has stayed at 9 percent for 25 years. The ratio is sharply lower than 18.7 percent in Germany, 17.9 percent in Japan, 25.8 percent in the UK and the 13.8 percent in the U.S. As President Yoon underscored, reforming the system is imperative.
But the work is not simple because it is politically suicidal to demand more money now to ease the pain for future generations. Former president Moon Jae-in turned down a government proposal to raise the premium as "it goes against public sentiment." Such cowardice could be repeated in the Yoon administration, too. A civilian advisory board to the National Assembly special pension committee has already missed a deadline to draw up a single reform outline before a government proposal is fixed in October.
For a breakthrough in the impasse, we need to look back at a few revolutionary moments of our history. Seven decades ago, land reform ended the thousands-years-old feudalist land tenure system to pave the way for a democratic system after liberalization from Japan's colonial rule. Article 86 of the first Constitution stipulated that farmland should be redistributed to farmers. The first task for the new government in 1948 — just three years after the independence — was farmland reform.
Under the Agrarian Reform Law of 1950, a tenant farmer was eligible to own the land from the landlord by sharing 30 percent of his crop yields for five years. (During the Japanese colonial period, the share was 50 percent.) Farmland ownership was restricted to 3 chungbo (1 chungbo is equivalent to 2.5 acres), and tenant farming was banned. After the decision, the landocracy fell.
The more equal the distribution of land, the better the output in food and education. Educated labor is essential to breed new capitalists. As a result of land reform, the income of the richest 4 percent farmers plunged 80 percent while that of the lower 80 percent increased 20 to 30 percent. Inequality eased. Rice production that averaged 2 million tons a year during the colonial period increased to 3.5 million tons early in the 1960s. Ju Dae-hwan, a former policy chief of the Democratic Labor Party, declared it had been the most successful land reform in world history.
The reform was successful thanks to bipartisanship. Korea's first President, Syngman Rhee, an arch anti-communist, recruited Cho Bong-am, a convert from communism, as his agriculture minister in charge of land reform. He has been Rhee's political enemy who opposed the presidential system championed by Rhee for fear of dictatorship. Still, Rhee found him the most "fit to win over farmers who could be tempted by the communist ideals." According to legislative records, Cho, the agriculture minister, defined land reform as "an effort to transform from a feudal society to a modern capitalistic system." Because farmers no longer were slaves to landlords and became owners of their own land, they did not give into communism after the North Korean invasion in 1950. President Rhee's cool-headed judgment helped defend the country from North Korean leader Kim Il Sung's ambition.
Rep. Kim Sung-soo, the leader of right-wing Korea Democracy Party decades ago, was a landlord but believed that sacrifice from landlords was necessary to prevent the spread of communism. Rep. Ra Yong-kyun of the Korea Democracy Party, a former independence fighter, doled out his land to farm tenants for free. Kim Dong-ri, a famed right-wing novelist, openly supported the reform. "If arguing for land reform and nationalization of key enterprises makes one leftist, every Korean must be leftist," he said.
To operate on the pension that could die without urgent surgery, leaders should be as determined as in the land reform. Former liberal president Roh Moo-hyun lowered the income replacement ratio to 40 percent from 60 percent even when more than 70 percent of the people opposed it. French President Emmanuel Macron vowed to stake his political life on wrapping up his crusade for pension reform within the year despite vehement opposition.
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