Ready for an elderly population of 10 million?

Joo Jung-wan
The author is an editorial writer of the JoongAng Ilbo.

Korea’s future is literally gray. The proportion of older members of society will be disproportionally large in the near future, given the worsening birth rate and the rapid pace of aging. The country’s aging is unprecedentedly fast. The year 2024 will set a demographic turning point with the older population reaching the 10 million milestone, or one fifth of the entire population. If the population decline continues, the Korean people will be headed toward an unchartered path.

This year, the baby-boom generation born in 1959 will turn 65. According to a 2022-2072 population estimate by Statistics Korea released in December, the population aged 65 or older will number 9.94 million by July 1. At this rate, the elderly population will top 10 million in August. Such an alarming population decline was anticipated earlier, but the social ramifications are huge.

Moreover, Korea will become a hyper-aged society, where more than 20 percent of the entire population are aged 65 or older. In other words, one out of every five Koreans will be 65 or above. Aging is not confined to rural communities. People living in Seoul and six other metropolitan cities are also quickly aging. By 2035, a total of 16 cities and provinces, except for the newer city of Sejong city, would be super-aged. In Busan and Daegu — the No. 2 and No. 4 cities in Korea — one out of three residents will be 65 or older.

In the meantime, the working population is quickly thinning. The economically active population aged from 15 to 64 peaked in 2019. Statistics Korea expected the number to fall to 34.17 million in 2030, or 2.4 million fewer from 36.57 million in 2023. The loss owes largely to the retirement of baby boomers. Im Young-il, director of demographic statistics at the statistics office, said that the working population will decline by 320,000 on average per year in the 2020s and by 500,000 in the 2030s, as the baby-boom generation born between 1955 and 1963 move into the older age group.

The demand for welfare services for the senior population will sharply go up while the number of people who should bear the cost declines fast. This is the conundrum awaiting Koreans. At this rate, the welfare costs landing on the younger generation will be unbearable. That requires a fast restructuring of the welfare system.

Most imperative is pension reform. The National Pension Service will fall into the red by 2041. From then, the government pension fund will deteriorate rapidly. Pension payouts for retirees will overwhelm the premiums the working population should pay. The national pension is expected to run out of money in 2055, the year people born in the 1990s turn 65.

When pension coffers are depleted, they must be covered by tax money. The tax must be paid by those still working in 2055 and onwards. Statistics Korea anticipates the working population to shrivel to 22.8 million by 2055, down 13.8 million from 2023.

In this case, the government could issue more national bonds instead of collecting more taxes. The move can be expedient but can destroy the integrity of public finance. Japan fell into a lengthy slump under colossal fiscal debts by opting for the easy way out. Japan has the world’s highest national debt-to-GDP ratio. Korea could end up even worse than Japan. The Japanese yen is preferred over the Korean won on international capital markets, and Japan has the world’s second-largest foreign exchange reserve. Korea is ranked nineth.

The government vowed pension reforms. But the reform outline had no substance. The national pension operation outline the government approved last October left out a specific plan on raising the premium rate. The majority Democratic Party (DP)’s floor leader Hong Ihk-pyo criticized the government for its “irresponsibility” and “incompetence” for the loose packaging of past ideas with no substance. Although he represents the opposition, he is not exaggerating.

But politicians have little to say. The National Assembly special committee on pension reform held only two meetings during the last regular session. The committee chair, Rep. Joo Ho-young of the governing People Power Party, said discussing the matter is hard as the government gave no framework for lawmakers to work with. The legislature was simply tossing back the hot potato to the government. But we cannot afford the leisurely game of ping pong. The government and legislature must set aside political interests and join efforts to fix the national pension for the country’s future before it’s too late.