Long-term Modelling for Financial Projections of Social Security

Abstract

Korea has seen in recent years the maturity of its public pension plans grow and its childcare programs and basic old-age pension expand in coverage. No consensus has been reached in Korea with respect to how to fund the projected increases in social expenditure, thus analyses of the raised public burden resulting from these projected increases are limited. It will be necessary in the future to determine more acceptable levels of increase in the public burden based on a more comprehensive fiscal evaluation of the levels of social expenditure and public burden, and an effective analysis of various measures for increasing revenue, including increases in social insurance contribution and improved national fiscal management. Reviews and discussions on how to ensure the sustainability of the social security budget and improve related systems and institutions based on budget projection results are needed in Korea. The social projections in this study were made from a neutral perspective, intent on analyzing likely fiscal burdens attendant upon the declining birth rate, the aging population, and the consolidation of the pension system. The findings of this study will provide important basic data for making structural and parametric improvements to NHI and other social programs. Insofar as the current social security structure is retained in Korea, the amount of expenditure for old age benefits will increase dramatically due to the aging population and the consolidation of public pension programs. In order to ensure the fiscal sustainability of social expenditure and in consideration of public burden, it is crucial to launch a public discourse on social security programs and their future, informed by reliable and official governmental data. Policymakers in Korea will need to consider a broad array of factors in designing future social security programs, particularly taking into account the rapidly aging population and the acceptability of public burden increases.