President Moon's "Considering Employment Extension" Remark Startles Companies

Emphasizing Senior Employment
Interpreted as De Facto Retirement Age Extension
Companies Express "Premature Timing" Concerns

[Image source=Yonhap News]

[Asia Economy Reporters Kiho Sung, Dongwoo Lee] As it became known that President Moon Jae-in mentioned 'considering employment extension' during a government ministry briefing, corporate anxiety is growing. Employment extension is interpreted as the concept of 'retirement age extension,' which imposes a huge burden on companies. Companies argue that discussing retirement age extension at this point, without wage system reform and employment flexibility, is premature and that these tasks should be addressed first.

According to the government and business circles on the 12th, President Moon emphasized the expansion of jobs for the elderly during a briefing with the Ministry of Employment and Labor, Ministry of Agriculture, Food and Rural Affairs, and Ministry of Environment held at the Blue House the previous day, stating, "It is now time to start seriously considering employment extension." This is interpreted as a call to begin discussions on creating jobs for elderly workers in the era of low birth rates and aging population.

Originally, the government had announced last year that it would prepare specific measures related to the 'continuous employment system' around 2022, near the end of the presidential term. The continuous employment system is a policy that obliges companies to continue employing workers beyond the retirement age through reemployment, similar in meaning to the hot-button issue of 'retirement age extension' in the labor market.

Regarding this, the business community is concerned that extending only the retirement age without reforming the wage system will worsen the performance of Korean companies and deepen polarization in the labor market. A representative from the Korea Employers Federation said, "As society ages, the labor force will become scarce, so it is a task that needs to be considered," but added, "The biggest problem is that many companies currently operate a seniority-based wage system (step system) where wages are paid according to years of service, so if the retirement age is extended, the burden on companies will increase sharply."

A representative from the Korea Economic Research Institute also emphasized, "After implementing the retirement age extension to 60 in 2017, there were side effects such as a surge in early retirements and worsening youth unemployment," adding, "I think the order should be to first resolve these side effects of retirement age extension and then implement the extension to 65." They continued, "To do this, it is necessary to shift the wage system from the step system to a job-based pay system," and added, "By applying wages differently according to ability and job, the burden on companies can be reduced and polarization in the labor market can be alleviated."

Concerns about polarization in the employment market due to retirement age extension are also notable. A representative from large company A said, "In reality, where the step system is predominant, if the retirement age is extended, the only option companies have is to reduce the number of new hires," emphasizing, "If employment flexibility and a wage system reform based on productivity are not implemented first, companies will not be able to endure."

A representative from large company B pointed out, "If the government sets retirement age extension as a policy, companies have no choice but to comply," but added, "However, since there is a high possibility of labor-management conflicts during the process of deciding specific implementation plans at each company, more detailed and careful consideration is necessary."

This content was produced with the assistance of AI translation services.