Exploring poverty heterogeneity between older old and younger old: evidence from South Korea

Abstract

Despite their significant dedication to the remarkable economic growth, the poverty rate of older adults in Korea remains the highest among developed economies. This study utilises the Shapley decomposition to analyse the effects of socio-economic changes and recently developed welfare system on poverty heterogeneity between older old and younger old. The findings indicate that the poverty rate for younger old improved from 47.9 per cent in 2003 to 32.3 per cent in 2020, whereas the rate for older old increased from 49.8 per cent to 60.1 per cent. Specifically, the contribution-based public pension presented smaller anti-poverty effects on older old than younger old, because it was implemented later, therefore, older old could not accumulate adequate contribution periods. In addition, means-tested benefits had limited effects in reducing the poverty risk for the two old groups, as they are not well-targeted and provide insufficient benefits. Furthermore, older Korean adults are compelled to participate in the labour market to make ends meet, and earned income significantly mitigated the poverty risk of younger old. Based on these findings, this article argues that the government needs to implement more inclusive fiscal measures to alleviate the poverty threat of older old.