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Implications of recent income distribution trends on national pension reform discussions

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Title Implications of recent income distribution trends on national pension reform discussions
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Material Type Videos
Author(English)

Korea Development Institute

Publisher

[Sejong] : Korea Development Institute

Date 2016-11
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < General
Social Development < General
Government and Law < Political Development
Holding Korea Development Institute
License

Abstract

The market income-based poverty rate is increasing while the disposable income-based, i.e. the final income which reflects government tax and expenditure, poverty rate is decreasing. This implies that through the government’s redistribution measures, which include public pension, social benefits, public transfer and basic old-age pensions, the poverty rate is decreasing. An examination of the income composition of households who have escaped poverty through the government’s redistribution efforts reveals that the contribution of public pension, including the national pension, was the most significant. The proportion leaped 8%p, from 60% in 2006 to 68% in 2015, hinting at a gradual increase in the size of contribution as time passes. In 2015, 74.3% of households who escaped poverty were public pension recipients while only 28.1% of recipients remained in poverty despite the government’s redistribution efforts. Similar observations were made for senior households. Of those escaping poverty, 80.6% were public pension recipients, while only 36.8% of recipients were still in poverty despite the redistribution. The fact that public pension has such a significant impact on poverty is tied to the rapidly increasing share of senior households among the population. That is, as the increase in the senior population drives up the poverty rate, public pension, which has a big impact on the income of the senior population, has become a key contributing factor. Therefore, we can assume that considering the progress in population aging, the role of public pension for the senior population will become increasingly important in easing poverty.