Why the reformation of the Public Pension System cannot be delayed
FINANCE MINISTER Choi Kyung-hwan described the Public Pension System as a "ticking time bomb” that will consume 55 trillion won of tax revenues over the next ten years. In reality, the pension problem is more of a deadly virus without a cure that has already been plaguing the Korean government and its employees for several years. With the system already in a \12 trillion debt and employees’ due payment rising for decades now, it is quite evident that a reform is inevitable. Why wait when it can happen now?
When making decisions, balance is always important, especially when the numbers are big. Ever since its establishment in 1960, the Public Pension System has been functioning based on its balance between money coming in and going out. Money that funds the system comes from both working government employees’ salaries and government contributions, which is basically tax money. Money going out is the money being paid to former government employees now living on pension. As of 2014, the system has been going off balance as the amount of pension money going out increased.
The problem in the contribution to the system surprisingly does not come from decreasing the number of government employees or tax revenue, but from increasing total payment to the retirees. Because there were fewer government employees in the 1960s, much less money was required to pay their pension. This resulted in 30 government employees contributing to the pension of one retiree, which is a very manageable ratio. With increasing numbers of government officials employed throughout the 1970s and 1980s, and the system coming into full maturity after 50 years of its existence, more government retirees are receiving pension than ever before. As a result, three working government employees now support one retiree. There is also the increasing median age for the Korean population, as people are living on average 30 years more compared to those in 1960. This has increased not only the number of pension recipients, but also the longevity of payment to one individual retiree.
To support this change, the government has carried out small reforms in the past two decades. Starting from 1995, the percentage of government employees’ salaries mandated by the pension system increased, beginning at 5.5% and reaching 10.8% as of 2010. With government workers now paying twice as much of their salaries as their seniors, they are feeling much more pressure. The problem is that even with the increased payment, the debt has not been solved. The yearly debt is increasing continuously, and the overall debt has accumulated to \12 trillion without any signs of stopping. With the current system, the overall debt is expected to reach \400 trillion by 2045. Hence, small reforms did not solve the problem in the long run; instead it applied more financial pressure on government officials and the government.
The only solution to this mess would be to accept the government’s proposal for reform. The reformed system would gradually lower both the salary payment percentage and the pension payment, so that it would reach the level of the National Pension System. Officials would get less money when they retire, but they would get increased portions of their salary while they are working. This would be the single reasonable way to save the system, without having to invest more of the employees’ money or tax revenues.
Change is not easy, especially if it seems like it takes away your money. Reforming the Public Pension System, however, is a necessary action to save working officials, the government, and the citizens who pay tax. The problem is only getting bigger by the second. If the situation is not handled, there will come a time when even more displeasing compromises will have to be made. It is genuinely now or never.
Disadvantages of the Public Pension Service Reform
PROTESTS AGAINST the reformation of the public pension system are continuously rising among government employees. Citizens are critical of the demonstration because they consider the struggle to be a mere pursuit of protestors’ own interests. Indeed, the most important issue that makes public workers so desperate would be reduced benefits. Considering the influence of the reformation ona larger scale, however, the issue concerns the citizens as a whole. Many people might think that a change in the public pension system means that they will be provided with more benefit, but the result is actually the opposite.
Although it is true that one should compare the internal valueof jobs such as aptitude or sense of accomplishment when decidinghis or her career, it cannot be denied that the public pension is one of the major advantages of being a public official. Public office jobs in Korea are considered to be boring, limited in effort-reward, and of low wage, but manystill chose to becomepublic officials because of the pension which would ensure their life after retirement. In fact many young applicants are struggling to be one for the same reason, despite its disadvantages. Perhaps it is because these days,peopleare very uncertain of their future. Yet, reformation of the public pension system would disappoint their expectation regarding the job and ultimately lead to a decreased number of competent government employees, which is bad news for governmental organization and furthermore, the country.
The more dangerous aspect of this reformation is that public workers mightbe distracted to earn money instead of concentrating on their duties. As government employees are obsessed with the diminishing pension, they would turn to private financial instruments, such as insurance, funds, and more. Public officials often have chances to make money in an improper way while they work, and this is why moral integrity is emphasized among them. If public workers are eager to make more money at the moment, it would be harder to overcome the temptation to embezzle the public money or accept bribes. Guaranteeing pension is the minimum service the government should provide for their workers to remain moral.
Despite the importance of maintaining the current public pension system, statistics regarding the depletion of funds for pensions might seem tremendous. It is the statistics that the government is consistently referring to, as they insist for urgent reformation. However, the numbers are overestimated because the amount of shortage partly attributes to the lending of funds to other departments when they are short of money, especially during the IMF. Therefore, the lent money should be redeemed from departments in debt and deficit of pension is not as astronomical as it seems. The first thing to do is to check if the funds are managed to make the highest profit or if there is another way to invest the funds on more profitable markets. Above all, the government should return all the “budget on credit, considering the inflation rate” back to its place.
Reformation of the public pension system is not only the matter of public workers but ours as well, because they manage important aspects of our lives and all the affairs of our country. Reformation of public pension means public workers’ low morale, low productivity of governmental organizations, and lowered benefit on the whole country. As the current pay for public officials – wage and pension altogether – falls short of the value of their work, citizens should reconsider the decrease in public pension before they deprive the officials of their minimum money to be paid for their service.