[Aftermath of the Wage Peak System] Illegitimate Child or Deficit... Sparks of Litigation and Labor-Management Disputes

Judgment on Mandatory Provisions of the Elderly Employment Act... "Consider Introduction Validity and Degree of Disadvantage"
First Criteria Presented for Assessing Wage Peak System Effectiveness
Labor-Management Disputes Highlighted at Frontline Workplaces... Reconsideration Inevitable

On the 8th, officials from the Public Institution Business Headquarters held a press conference in front of the Presidential Office in Yongsan-gu, Seoul, urging the abolition of the wage peak system guidelines and demanding labor-management negotiations. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Choi Dae-yeol] Is it an illegitimate child of forced retirement age extension, or a legitimate child born from social consensus?

Views on the wage peak system in our society are divided. It has been 20 years since the system was first introduced domestically, and about 6 to 7 years since it spread mainly to public enterprises, financial sectors, and major conglomerates in line with the revised law enforcement. If it were any other system, it would have likely entered a stabilization phase, but rather, controversies surrounding the system seem poised to escalate even more than at the time of its introduction.

Recently, the Supreme Court's ruling that the wage peak system at a certain workplace is invalid has been the trigger. In materials released after the ruling on the 26th of last month, the Supreme Court stated, "Whether the wage peak system of an individual company is recognized depends on the legitimacy and necessity of the introduction purpose, the extent and duration of actual wage reduction, whether there was a reduction in workload or intensity equivalent to the wage cut, and whether the reduced funds were used for the intended purpose."

This is why frontline companies, labor unions at each workplace, as well as employer and worker organizations and legal groups have become busy. About 130 employees of Korea Aerospace Industries (KAI) recently filed a class-action lawsuit claiming the wage peak system is invalid. At POSCO, some unions have started forming a lawsuit group, and the KB Kookmin Bank union also plans to gather members and file a lawsuit by the end of this month.

On the 8th, at the Federation of Korean Industries building in Yeouido, Kwon Tae-shin, Vice Chairman of the Federation of Korean Industries, is speaking at a seminar titled "Key Issues and Countermeasures of the Supreme Court Ruling on the Wage Peak System."

Although each has somewhat different backgrounds, the lawsuits target similar goals: to determine right and wrong in court. The Samsung Electronics union has asked the company for its position on this ruling and demanded compensation. The Hyundai Motor and Kia unions, having included the abolition of the wage peak system as an agenda item in this year's wage and collective bargaining negotiations, have decided to raise their voices in the ongoing negotiations rather than immediately filing lawsuits.

To understand the context of the growing controversy, one must first note the political consensus in 2013 to extend the retirement age to 60, the government's acceptance of the wage peak system before the law's enforcement, and the discussions at that time. Although there were concerns that cutting wages before retirement would undermine the purpose of extending the retirement age, the wage peak system was established as a mainstream within the institutional framework for reasons such as easing corporate burdens and creating youth jobs. Limiting this to a few is due to the dual structure of Korea's labor market, which has been entrenched since the 1990s.

We must also consider the background of the post-war baby boom generation's retirement and aging, the resulting decrease in the working-age population, the introduction of the seniority-based wage system where longer service means higher pay, and whether such a seniority-based wage system is appropriate in the changed management environment. It is time for a sober review of whether the wage peak system has contributed to employment stability for middle-aged and older workers or to creating youth jobs, as originally intended.

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