Debate Over Extending Retirement Age in South Korea Continues

There is growing social consensus in South Korea to extend the legal retirement age from the current 60 to 65. However, concerns about youth employment and increased burdens on businesses remain prevalent, prompting calls for a dual approach that includes a continuing employment system and wage reform, similar to strategies adopted by major developed countries.

A survey released on June 15 by the Korean Confederation of Trade Unions found that 88.3% of respondents support gradually raising the legal retirement age under the Employment of Older Persons Act from 60 to 65.

Despite this consensus on the need for an extension, many voices emphasize the necessity of institutional safeguards to minimize potential side effects, such as a decline in youth employment. Among respondents aged 40 to 60, 42.7% believed that the differing job roles of older and younger workers would not significantly threaten job opportunities. In contrast, 36.0% of those in their 20s and 30s felt that measures to support youth employment should take precedence.

This dilemma is not unique to South Korea. Other advanced nations that have entered super-aged societies have also grappled with the challenges of expanding employment for older workers while addressing youth employment and business burdens. However, these countries have focused more on how to enable longer working lives rather than merely extending retirement ages.

For instance, Japan has gradually established a continuing employment system that transitions from a retirement age of 60 to securing employment at 65 and then providing job opportunities until 70. Notably, the system for securing employment at 65 was implemented gradually over 12 years, with the eligible age increasing by one year every three years to facilitate a smooth transition.

European countries are concentrating on encouraging older workers' participation in the labor market rather than simply extending retirement ages. They link pension, tax, and labor market systems to provide incentives for continued work after retirement. Germany, in particular, is promoting tax benefits for older workers who continue to work beyond the legal retirement age, thereby encouraging voluntary participation in the labor market.

In contrast, South Korea remains mired in a social debate over whether to extend the retirement age. With a clear dual structure in the labor market between large corporations and regular workers versus small businesses and non-regular workers, there are concerns that extending the retirement age could exacerbate labor market polarization by primarily benefiting higher-tier workers' job security.

Nevertheless, if a continuing employment system is successfully implemented, it could have positive effects on the economy as a whole. According to the Bank of Korea, if continuing employment becomes stable, older workers could maintain productivity in their primary jobs for longer periods. This could help mitigate the slowdown in growth due to a declining labor supply and contribute to individual income stability. The Bank estimates that if continuing employment is possible until age 65, the cumulative economic growth rate could increase by 0.9 to 1.4 percentage points over the next decade.

Experts emphasize that merely extending the retirement age is insufficient and advocate for a package approach that includes a continuing employment system and wage reform. They argue that the issue of extending the retirement age should not be viewed solely as a conflict between generations but rather approached from the perspective of labor market structural reform.

Professor Kim Dae-jong of Sejong University stated, "Simply extending the retirement age without reforming the rigid wage system based on seniority into a performance-based system could undermine corporate sustainability and worsen youth unemployment. It is urgent to design a system where continuing employment, wage reform, and incentives for hiring young workers are integrated."