The author is the head of the financial team of the JoongAng Ilbo.
David Willetts, an English Conservative Party politician and a member of the House of Lords, predicted the discord between the baby boomers, born between 1945 and 1965, and younger people in his 2010 book “The Pinch: How the Baby Boomers Took Their Children’s Future — And Why They Should Give It Back.” The baby boomers could accumulate wealth as housing prices rose and enjoy life-long employment and pension benefits. In contrast, younger people, struggling with student loans and unstable employment, have trouble buying homes and cannot even dream of getting a pension.
Moreover, Willetts claimed that the baby boomers receive about 20 percent more money than they had paid to the government and pointed out the unfairness of “generational accounting.” Generational accounting is a method of calculating gains and losses from how much a generation pays to the government in tax and insurance and how much it receives in pensions, various social insurances and other benefits from public spending.
In general, the older generation is in surplus while children and younger people are in deficit. The problem is that the baby boomers make up the social elites and an overwhelmingly large portion of the voters in the population structure, and they don’t want to give up their vested interests, compounding the burdens on the young.
Korea’s situation is no different. With the Moon Jae-in Care that reinforces the coverage of health insurance, the reserve for health insurance will run out by 2024, three years earlier than expected. The revision on the national pension to delay the timing of pension fund depletion was not included in the review items of the National Assembly’s health and welfare committee on Nov. 27 and 28. The National Assembly Budget Office expects the 708 trillion won ($598 billion) pension fund will run out in 2054. When the fund is exhausted, the insurance premium — currently 9 percent of the income — could go up to as much as 25 percent.
Politicians ignore the danger of using up the reserves and transferring the burden to the future in order not to upset the voters. In the generational accounting, deficits of the future are infinitely increasing. The devastating birth rate of 0.88 in the third quarter may be a mass resistance against the mercilessness.
JoongAng Ilbo, Nov. 2, Page 35