`Payment Level and Amount of National Pension Fund Should be Lowered`

If South Korea, a country where aging of the population is progressing rapidly unheard of elsewhere in the world, wants to continue an economic growth, it should establish a reformed social security system, for instance, delaying the paying period and amounts of the National Pension Fund, according to a report of the Korea Development Institute (KDI).

KDI proposed that way in a report titled, `Economic Effects of Aging Population and Countermeasures` presented to the National Economic Advisory Meeting held on May 28 and attended by ministers of the Ministry of Finance and Economy, the Ministry of Health and Welfare, the Ministry of Labor, and four heads of major trade associations.

KDI forecasted the Korean economy will experience unprecedented fast aging as the age group of more than 65 years old, which accounted for 7.2 percent of the population in 2000, will increase to 14 percent of the population in 2019, 19 years afterward, and warned the slowing down of the economic growth is highly likely as productive work force continues to shrink.

Additionally, the increase of senior citizens means the economic class living on saved money is increasing, which will discourage investment with the decrease of the total saving. Additionally, the report forecasted a serious budget deficit may be possible since budget outlays such as old aged people`s medical cost and welfare would rapidly increase while the total budget revenues might decrease.

Civil members who attended the meeting including chairman of the Korea Chamber of Industries and Commerce (KCIC) Park Yong-Seong said, `Aging population is the most important issue in the advanced countries` economy,` and agreed on, `that is the major change that affects a whole society.`

The report urged to maintain the policy fundamentals of encouraging the lengthy holding of employee status of working forces as much as possible to minimize the negative impact the old age affects the economy. It proposed to stem the early retirement by lowering and delaying national pension currently set at the age of sixty. In relation to this, chairman of the KCIC presented a view, `Not only pension payment following the age, but also the payment period should be different according to the amount of income of the recipients.`

The report further urged the abolition of retirement age limit and proposed to increase equities investment of national pension funds (currently set at 6 percent level).

The report warned that negative effects might appear at once when prior counter measures are not established even the repercussions of old age may be apparent after 2010.

A researcher of the KDI Lee Hae-Hoon pointed out, `When New Zealand raised the pension payment age from 60 to 65 for a period of ten years beginning from 1999, the employed percentage among the age group of more than 61 years old increased remarkably,` and added, `Korea is a country where the early retirement is widely applied compared to the member countries of the Organization of Economic Cooperation and Development (OECD).`

Women members of the meeting including president of the Women`s Resource Development Institute Jang Ha-Jin claimed issues such as encouragement of pregnancy or expansion of infant facilities should be priority policies in dealing with the aging society.

Rae-Jeong Park ecopark@donga.com