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Social Consensus Crucial for Pension Reform 

The Hankyoreh

South Korea

January 9, 2008

President-elect Lee Myung-bak’s presidential transition team has decided to form a task force to talk about ways to reform the National Pension. It is right to move so quickly on pension reform, being a major issue for our society. The discussion will apparently include ideas like combining the National Pension and the Basic Elderly Pension (Gicho Noryeong Yeon’geum), making pension operations more independent, and linking the various pensions for public servants.

The problem here, however, is with the specifics of how to go about reform and how those ideas are being formulated. There are many times when the success or failure of pension reform ends up having been determined more by how it was gone about than by what was actually done about it, because it is a classic example of a highly contested issue, this for the fact there are so many conflicting interests involved: the current generation versus the future generation, employers versus workers, for example. This is why you look for solutions to pension reform in “social consensus” rather than in calculations of what is most advantageous for any one group.

We have much to learn from the experiences of Sweden and France. Sweden repeatedly found itself frustrated by failures at pension reform until 1994, when it created a commission with the participation of the Social Democratic Party, the right wing party, and labor and employers’ organizations, and it was only at that point that the country was able to make progress. France has consistently been working on pension reform since 2000, when it created a commission that involves the participation of businesses, the self-employed, the labor community, ruling and opposition members of the national legislature and people from the executive branch. The French commission provides a full disclosure of the discussion process and always holds public hearings on major aspects of reform proposals.

Social consensus is not about finding a compromise that satisfies everyone. But you cannot achieve fundamental reform by going through a process of public consensus to find a workable compromise and then, from there, continue looking for solutions to the complex questions that remain. This is a point that Lee’s task force on pension reform should not overlook.

It would indeed be to some degree desirable to organize the Basic Elderly Pension and the National Pension into one framework, have welfare assistance for the elderly be covered by a pension program designed to do so and have a pension program that is commensurate to personal income solve the problem of providing regular allowances and maintaining financial security. There of course need to be overall principles established for determining how much is paid into, and received from, pension programs. The idea behind the whole pension system is supposed to be about guaranteeing income in later life. We also need to figure out how to come up with the necessary finances for the increasing amount of money that will be needed to pay out “basic pensions” (gicho yeon'geum) for the elderly. Simultaneously reforming special pensions, like those for civil servants, is also a fine idea, but it absolutely has to be implemented this time around.

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