Elderly singles face financial hardshipKorea’s aging population is one of the country’s most pressing social and economic concerns.
According to the United Nations, it became an “aging society” in 2000 when more than 7 percent of the population was 65 years old and over.
Since then, the elderly demographic has swelled relentlessly, with the number of older adults living alone doubling to 1.02 million in the past decade, according to Statistics Korea.
What is increasingly worrisome is the dire financial conditions of those single-person senior households. Some eight out of 10, or 76.6 percent, live in relative poverty, far and away the highest rate among the 34 OECD nations, and six times higher than Sweden (13 percent), which has wide social safety nets. Considering that Korea’s overall poverty rate stands at 14.6 percent, senior households are hugely affected.
Single elderly women are especially hit hard. Their labor force participation rates and income levels are noticeably inferior to those of their male counterparts. Around 80 percent only have up to an elementary education, compared to 44.3 percent among their male counterparts.
Married elderly women naturally have more income at their disposal, compared to single women, but their dependence on their husband’s earnings is outsized. In nine out of 10 cases, single elderly women are widows.
According to a study by the National Pension Service, the average disposable income of an elderly woman declines from 9 million won ($8,000) to 7.8 million won after her spouse passes away.
As such, bereavement, especially for mid- to low-income women, is the key determinant of their future disposable income level. Policy adjustments are needed to provide income security for the elderly and this is a daunting task both socially and economically.
To minimize the burden on society and individuals, policy makers need to pay greater attention to the economic dynamics and regulatory environment surrounding single elderly households and make adjustments accordingly. At least four policy measures are needed.
First, special attention should be paid to single elderly women because they are expected to live longer than elderly men, and they won’t receive as much support from their children in the future as previous generations did. Elderly Korean women live alone for another 7.5 years on average after their husband has died. Thus, the government, society and individuals should explore ways of compensating them for their loss of income during that period.
Second, new financial management services for low- and mid-income earners are worth considering. At present, these services are oriented toward high-income earners and are concentrated on certain financial products. This means it is not feasible for the economically vulnerable to prepare for their later years. In this area, Korea could benchmark the policies of the U.K.
Third, the rising divorce rate among older couples draws attention to the unequal treatment men and women receive in terms of pensions. The National Pension System is the only public pension program that allows husbands or wives to claim half of their spouse’s retirement savings. The other three public pension programs, which cover government employees, military personnel and teachers at private schools, withhold this right. To make the situation fairer, and to help divorced elderly women secure an income, all public pensions should be able to be divided in this way.
Lastly, the benefits for widows awarded under the National Pension System should be increased, especially for low- and middle-income earners or classes. Currently, the state pays between 40 percent and 60 percent of an insured pension in the form of benefits to surviving spouses or offspring. But as these benefits are so low - $209 a month on average - it is hard for the National Pension System to guarantee elderly people’s financial security in later life.
*The writer is a research fellow at the public policy research department at the Samsung Economic Research Institute. For more SERI reports, please visit www.seriworld.org.
By Kim Jeung-kun
More in Economy
OECD knocks tenth of a point off Korea's 2020 growth
Bos taurus philately
$504 billion budget for 2021 ready for passage
￦50,000 banknotes on the lam as cash is king