Experts say older people not nearly as poor as numbers suggest

Economy

Published: 29 Sep. 2023, 15:00

Experts say older people not nearly as poor as numbers suggest

Nearly 7 million people aged above 65 will receive a monthly basic pension of 334,000 won ($250) in 2024. [GETTY IMAGES]

Nearly four out of 10 people over the age of 65 in Korea were categorized as poor as of 2021. However, experts say this figure is misleadingly high since it fails to take into account their real wealth, including assets.

The relative poverty rate of people older than 65 dropped to 37.6 percent in 2021, down 3.8 percentage points from 2019, according to Statistics Korea data.

The relative poverty rate measures the ratio of people older than 65 with an income below the median.

It was at 46.5 percent when the statistics agency began collecting the relevant data in 2011.

The drop comes on the back of a strong labor market for older adults and the rising number of people older than 65 receiving basic pensions that began in 1988.

The average annual income of people older than 65 stood at 37.5 million won ($28,000) in 2021, down 25 percent from 2016. Their employment rate hit 38.7 percent in August with 3.68 million people older than 65 working.

In August 2013, 32.6 percent, or 1.97 million, were employed.

Despite changing economic circumstances for people older than 65, the standard of eligibility for basic pensions has remained the same since 2008.

This meant that in 2008, a single-person household would have received a pension if it earned less than 870,000 won a month but in 2023, it would receive a pension even with a monthly income of 2 million won.

Pension payments also grew over the period. In 2008, basic pensions were 100,000 won per month; they will hit 334,000 won a month in 2024. Almost 7 million people will be receiving basic pensions next year.

“Theoretically speaking, a person earning 3.97 million won per month from work income would still be eligible for basic pensions,” said Choi Ok-geum, senior researcher at the National Pension Research Institute, at a pension-related budget committee meeting on Sept. 1.

This is possible because 1.08 million won in work income can be waived in income calculations, and earnings from public welfare jobs are entirely waived.

The poverty rate of people over 65 falls further if their assets are also taken into consideration, experts say.

Of people aged over 65 who possessed more assets than 60 percent of the entire population, 45.2 percent were in the bottom 60 percent income bracket.

This is to say that older people are more easily categorized as poor than younger people. Among those aged under 65, only 10 percent with more assets than 60 percent of the population were in the bottom 60 percent income bracket.

Another study published by the Korea Institute for Health and Social Affairs (Kihasa) in 2017 claimed that only 21 percent of those aged over 65 were actually poor.

The poverty rate for people over 65 at the time was 46 percent, but more than half were actually above the poverty line when their property assets were taken into account, the report said.

Nearly 47 percent of people in the 60s owned a house in 2021, while only 30 percent of the population as a whole did so.

“The real problem with the older population is not their general poverty but the polarization in their economic circumstances,” said Yoon Suk-myung, a researcher at Kihasa.

Pensions should focus on people who actually suffer from poverty, Yoon added.

BY JEONG JIN-HO [sohn.dongjoo@joongang.co.kr]