Targeted welfare needed as Korea faces slowing growth and rapid aging

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Targeted welfare needed as Korea faces slowing growth and rapid aging

Published: 11 Jun. 2025, 00:03

Audio report: written by reporters, read by AI

Kim Sang-ho

The author is a professor at the Gwangju Institute of Science and Technology and the former president of the Korea Institute for Health and Social Affairs.

The administration of President Lee Jae-myung has begun under conditions of entrenched low growth and accelerating population aging. These factors place Korea’s welfare system under unprecedented fiscal pressure. The Bank of Korea recently revised the country’s projected economic growth for 2025 downward from 1.5 percent to 0.8 percent. The 2026 outlook was also reduced from 1.8 percent to 1.6 percent.

Older adults wait in line for free meals at Tapgol Park in Jongno District, central Seoul, on May 12. [NEWS1]

In the longer term, the Korea Development Institute expects the nation’s potential growth rate to fall to 0.7 percent in the 2030s and 0.1 percent in the 2040s, with the possibility of negative growth later in that decade. This slowdown, primarily driven by a shrinking labor force, means Korea will face growing challenges in securing the tax revenue needed to fund its welfare programs.

In this context, improving the efficiency of welfare spending is more important than ever. A necessary first step is to reconsider how Korea defines old age in social policy. As the health of older adults continues to improve, the eligibility age for various welfare benefits should gradually rise from 65 to 70.

Effective welfare policy requires precise targeting. While enhancing the reliability of the basic pension through higher benefit levels, the government should narrow the eligible population from 70 percent of seniors to a smaller group of the most vulnerable.

Older adults are seen at Tapgol Park in Jongno District, central Seoul, on May 27. [NEWS1]

Spending on the basic pension has surged — from 16.7 trillion won ($12.2 billion) in 2020 to a projected 26.1 trillion won in 2025. Yet its impact on poverty has been limited. Korea’s relative poverty rate among the elderly remains at 38.1 percent, despite the heavy fiscal investment. My analysis found that the poverty reduction effect of the basic pension in 2022 was only 6.4 percentage points. Because the maximum monthly benefit — expected to be 342,510 won in 2025 — is modest, only those just below the poverty line can escape poverty through this benefit. The poorest seniors remain below the threshold even after receiving it.

Moreover, about one-third of recipients — roughly 25.5 percent of the elderly — already live above the poverty line. Because benefits are distributed to 70 percent of seniors, many receive assistance without meeting the original intent of poverty alleviation. This mismatch calls for a gradual reduction in coverage to 50 percent of the elderly. If cutting recipients proves politically difficult, a differentiated benefit increase could be considered — raising payments more for lower-income seniors while holding increases modest for those with median or higher incomes.

Korea’s National Basic Livelihood Security system aims to guarantee a minimum standard of living by providing income, housing, medical and education support to those in need. In 2025, its budget stands at 21.86 trillion won, accounting for 20.4 percent of all social welfare spending. Past administrations have expanded both eligibility and benefit levels. For example, the monthly subsistence benefit for single-person households has reached 765,444 won, aligning with the average among Organisation for Economic Cooperation and Development countries.

While the current benefit levels and selection criteria appear sufficient, coverage gaps persist. Despite being designed to guarantee minimum living standards, the system still excludes many in need. Tragic cases — like the 2014 death of a mother and two daughters in Songpa, and a similar 2022 case in Suwon — led to the introduction of emergency assistance programs, adjustments to the family support obligation rule and improvements to the government’s crisis monitoring systems.

The Ministry of Health and Welfare has expanded its alert indicators to include electricity and water disconnections, unpaid phone bills and lapses in health insurance. However, the recent “Iksan mother and daughter” case was not detected through this system, revealing that significant blind spots remain in identifying high-risk households.

Korea risks following in the footsteps of Japan’s so-called “lost three decades,” marked by persistent growth below 1 percent and demographic decline. Given these structural challenges, it is no longer realistic to expect a continuous expansion of welfare budgets to support minimum living standards.

Instead, the new administration should prioritize allocating available resources toward the most vulnerable populations. This means moving away from broad-based cash transfers and toward targeted support. Equally important is refining administrative systems to more effectively identify and assist crisis households, thereby narrowing the welfare blind spots.

An individual visits the National Pension Service office in Seodaemun District, western Seoul, on March 18. [NEWS1]

Pension reform should also be pursued to ease the financial burden on younger generations. At the same time, Korea must integrate its fragmented delivery system for community-based elderly care and other social services, enhancing both reach and cost-effectiveness.

As the country prepares for a future shaped by slower growth and population aging, Korea’s welfare policy must shift from universal expansion to precision and prioritization. Only by concentrating support on those most in need and restructuring outdated systems can the nation build a sustainable and equitable safety net.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.