Decomposition Analyses of the Trend in Poverty Among Older Adults: The Case of South Korea

Abstract

Objectives: We examine the sharp increase in poverty among older adults since the mid-1990s in South Korea.

Method: We apply decomposition analyses to quantify the contributions of demographic and household characteristics, as well as income sources, to the rise in poverty among older adults.

Results: A rapid increase in the number of older adults living independently, combined with an increase in the number of old older adults, largely explains the rising poverty rate among Korean older adults. At the same time, market incomes and private transfers are no longer dominant sources of income for older adults. Gradually rising public transfer incomes offset most of the decline in market and private transfer incomes. Public transfer could not counteract the formidable consequences of changing living arrangements and other changes related to a rapidly aging population.

Discussion: The Korean experience shows what would have happened to older adults in rich welfare states if mature old-age income security programs had not been in place. It may also provide some lessons for lower-income countries where poverty among older adults is set to become a larger problem in the coming decades.

Keywords: Living arrangements; Old-age pension; Poverty; Sources of income.