Bracing for an old society

The government yesterday finalized a pivotal section of its second basic plan for a low-fertility and aging society after scrupulously studying the issues. It plans to encourage companies to induce their employees to choose retirement pensions over one-time severance pay, while also offering incentives to small- and medium-sized businesses to introduce pension fund systems like their bigger counterparts.

The government tried to map out some feasible ways to provide insurance to those in the second-lowest income bracket who have been excluded from the national pension system. The government will also push ahead with a deferment of retirement age for salaried workers after reaching a consensus in the Korea Tripartite Commission of Labor, Management and Government. Given that Korea is heading toward an aging society at a rapid clip, the government has made a correct - and unavoidable - decision.

In five years, Korea is expected to enter the age of an aging society, with people over the age of 65 taking up 14 percent of the entire population, way beyond the current status in which senior citizens account for 7 percent. Moreover, our economy shows strong signs of low growth and low interest rates, which means senior citizens can hardly make a living solely based on rent revenues or interest income.

The most reliable social safety net is, of course, public pensions. While senior citizens in the OECD countries receive 80 to 90 percent of their total income from governments, the figure for their Korean counterparts stands at a meager 15.2 percent. It would be a colossal disaster to confront an aging society without expanding the national pension system.

Delaying retirement age is another pressing issue. If the age is raised, senior citizens can have more time to prepare for their later lives in financial terms. So, the government should first introduce a salary peak system followed by a changing of the current wage system from seniority-based to performance-based pay.

In order to relieve employers of their increasing financial burden, the government must devise some practical ways to support them, including revising the tax code, in particular. The OECD has suggested Korea brace for the aging of its society as quickly as possible, including an abolition of the corporate retirement age to help achieve sustainable growth down the road. Whereas the outside world is ringing sharp alarm bells for us, all is quiet here. It’s time to put all these ideas into action.