This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.
Implications: Elderly poverty jeopardizes the further growth of South Korea’s digital consumer economy. Digital services recently enjoyed rapid growth due to social-distancing measures implemented to contain the COVID-19 outbreak – and older citizens represent one of the fastest-growing consumers on contactless platforms. However, consumption by this cohort is limited because of the share of elderly citizens who live in relative poverty. Further damaging the purchasing power of older consumers, COVID-19 has forced many of them to suspend work due to their vulnerability to the infectious disease. The government’s efforts to deal with the broader employment shock is focused on creating more jobs in digital industries. Unfortunately, older workers are not suited to these positions and it is expected to intensify economic challenges for older furloughed workers.
Context: Elderly poverty is one of the biggest challenges facing the Moon administration. Workers rapidly face relative poverty as they grow older because of the weak pension system. In response to this challenge, the government has been increasing the budget for creating jobs for elderly workers. However, efforts to date have been criticized for being inefficient because they focus on increasing short-term employment instead of improving the quality of jobs that would also deliver higher wages. Lack of financial literacy is also considered as one of the main reasons for senior poverty. In response, banks were planning to strengthen digital financial education for seniors, but all plans are suspended due to COVID-19.
Korea View was edited by Yong Kwon with the help of Gordon Henning, Soojin Hwang, Hyungim Jang, and Ingyeong Park.
Picture from user Bridget Coila in Flickr.