Incomes Increase, But Little Remains

Mr. H, a manager of a conglomerate who has been working for 10 years, was stunned when he compared last month’s salary account with that of five years ago.

His salary has risen about 900,000 won from 1,400,000 won to approximately 2,300,000 won in the last 5 years, but the amount he actually received in his hand grew only by 600,000 won due to the great increase in statutory allotments such as health insurance fees and the national pension.

The statutory allotments such as taxes, public pensions (a national pension, a military pension, a schooling pension), and social insurance (health insurance, employment insurance) a family has to pay under are radically increasing. They are adding together even more rapidly than income increases, causing the burdens of people to grow heavier.

According to The Bureau of Statistics on the 5th, the monthly average statutory allotment per household of an urban worker last year jumped to 227,475 won, which is as much as 3.2 times higher than the 7,236 won of 1993. Consequently, the part the statutory allotment takes charge of in the total income has also increased from 4.8 percent in 1993 to 7.7 percent last year.

The specific items are as follows: △The national pension rose 5.5 times from a monthly average of 10,934 won to 60,242 won △health insurance rose 3.9 times from 12,219 won to 48,059 won △taxes rose 2.3 times from 39,445 won to 92,283 won.

The rate of income increase last year came to a halt at 5.3 percent, but the public pension, including the national pension, jumped to 12.3 percent, and health insurance fee to 26.8 percent.

The ground for such drastic increases in the statutory allotment is that the number of pension members is constantly getting bigger due to the expansion of objective people of the public pension. Not only that, the health insurance fee has been soaring up unceasingly for the last few years.

Such increases in the statutory allotment are partly inevitable as the country shifts to a “welfare society” model, but there are worries that it may lead to a decrease in the rate of savings and shrinkage in consumption.

The Korean Development Institute (KDI), in its report released last month on the economic outlook, stated that “one of the causes for the continual decrease in the recent rate of domestic civil savings is related to the spread of pension systems.” Choi, Gong-pil, a senior researcher of the Financial Research Institute, said, “The statutory allotment is socially guaranteed in its characteristic and works as a redistribution of income, so it is bound to increase in the future. However, in accordance with the decrease of disposable income, it may have negative effects on the rate of savings and consumption.”

Choi added, “If the national pension ameliorates the subjects and means of management and introduces effective and evident administration, there is room to reduce the citizens’ burdens.”

Oh, Moon-suk, an executive director of the LG Economy Research Institute commented, “ The statutory allotment is a social safety guard, and the current level is not really high enough to weaken consumption at this point. However, it can be a huge burden to needy people such as low-income families.”

Jong sik Kong Chi-Young Shin kong@donga.com higgledy@donga.com