`Korea should promote female employment, reform pensions`

The government should promote female employment and reform the national pension scheme in an effort to tackle looming economic problems triggered by the fast ageing population, the Korea Development Institute said.

A report released yesterday the state-run think tank warned the low birthrate may reduce the nation`s labor pool in the coming decades, dragging down economic potential.

The KDI called for the economic participation of women and older people as part of efforts to offset an upcoming decrease in the working population.

"Female economic participation is very low compared to those in other developed economies," the paper noted.

Korea`s female economic participation rate posted 53.9 percent as of 2004, far below those of other industrialized peer economies such as Iceland with 81.8 percent and Sweden with 76.6 percent.

Korea has been showing relatively low unemployment figures in recent years, but its population is still less economically active than Western counterparts due to the low female employment.

The KDI researchers also expressed concerns about widespread early retirement and the economically feeble aged population.

It found over a quarter of people aged 60 or more earn less than legal minimum wages.

More than 60 percent of the aged population received subsidies from their children due to a lack of quality jobs and insufficient pension payouts, according to the KDI.

This clearly contrasts with less than 20 percent with U.S. senior citizens.

"The current labor market and corporate personnel management based on discriminatory early retirements will not be sustainable in the near future when the aged population will be a majority of the labor force," the paper said.

It stressed the government needs to expand retraining programs to raise the productivity of older workers.

The government`s recent pledge to raise the retirement age and cut military service is largely in line with the KDI`s stance.

Policymakers announced last week it will offer business incentives and reform employment rules to encourage employers to hire seniors.

Mandatory military service terms will be cut six months by 2014, which would help young job seekers find jobs faster.

The KDI also warned that the fast aging population will jeopardize public pension schemes and budgets through boosting fiscal spending in the coming years.

"The current fiscal policy cannot remain unchanged," the report said.

It cautioned that national pension funds and government budgets are likely to post huge deficits due to shrinking revenue and soaring welfare expenditures.

The public health insurance program is estimated to spend nearly 130 trillion won in 2030, over five times the current expenditure.

The state spending on welfare programs and pension benefits will soar from 30 to 43 percent of the national output in 2050, far above the United States and Japan, according to the KDI.

The institute pointed out the increase will be mostly financed on national debt.

The think tank urged policymakers to revamp such a financially unsound structure as early as possible to ease the growing fiscal burden.

(kkt@heraldm.com)



By Ko Kyoung-tae