[Insight & Opinion] Extending the Retirement Age and Pension Reform Are Medium-Term Challenges

University students focus on short-term tasks such as midterm exams and group presentations that are immediately in front of them. However, what greatly influences their career paths are medium-term tasks like language proficiency. Ordinary people tend to postpone medium-term tasks because they are neither urgent issues nor do the results of their efforts appear immediately. In contrast, successful people prepare steadily over a considerable period, achieve the goals of these tasks, and reap significant benefits.

Extending the retirement age and pension reform are medium-term challenges for Korean society. Originally, retirement age and pensions are separate issues unrelated to each other. However, the Yoon Seok-yeol administration has no choice but to link the two, and it must do so. Although the positive term "reform" is attached, pension reform demands sacrifices. This is because it involves either paying more into the national pension, receiving it later, or receiving less. Extending the retirement age is the best compensation for these sacrifices. The bold move to simultaneously delay the retirement age and the pension eligibility age is already succeeding. Sweden has raised both the retirement age and pension eligibility age to 67 starting this year. Germany has decided to raise the retirement age from 66 to 67 and the pension eligibility age from 65 to 67. Japan has mandated employment at age 65 under the "lifetime active" principle and allows choosing the pension eligibility age between 65 and 75.

Domestically, the demand for extending the retirement age is an unstoppable trend. This is evident even in the headline of an economic newspaper article titled "As Baby Boomers Retire, All Industries Cry Out for Retirement Age Extension." Our people can work longer in their careers. This is confirmed by the Supreme Court raising the physical retirement age, or "labor availability age," from 60 to 65. Our people want to work longer. In a Realmeter survey, 50.4% of respondents supported extending the retirement age to 65.

However, South Korea is missing the timing to adjust the retirement age and pension eligibility age. Some countries have raised the retirement age to between 62 and 67 and eliminated or reduced the gap between retirement age and pension eligibility age, known as the "crevasse" (a fissure in a glacier). In contrast, we have a five-year crevasse. Many households worry about "how to make a living from retirement at 60 until pension payments start at 65." This is due to past governments wasting time despite statements like "It is time for social discussion on retirement age extension" (Hong Nam-ki, then Deputy Prime Minister for Economy, 2019).

Another factor blocking retirement age extension is major companies' distrust of militant labor unions. Management, shocked by annual strikes and labor-management conflicts, is extremely reluctant to extend the retirement age as it would strengthen and preserve union power. Several large companies where the Korean Confederation of Trade Unions (KCTU) unions are dominant, such as Hyundai Motor, fiercely oppose extending the retirement age. There is no room for compromise. The business community develops arguments to justify opposing retirement age extension. When major employers strongly oppose it, institutionalizing retirement age extension is difficult. As a result, even workplaces without labor-management issues do not extend the retirement age.

Some KCTU-affiliated large company unions have expressed willingness to engage in disputes and collective actions to enforce retirement age extension. The Korean irony is that militant unions pushing retirement age extension by force become the biggest obstacle to it. Because the retirement age extension issue remains unresolved, linking retirement age and pension eligibility age and pension reform also become tangled.

Sweden’s labor, management, and government steadily discussed for 10 years and reached a compromise to set both retirement age and pension eligibility age at 67. They achieved a medium-term task essential to the lives of their people. Can the Yoon Seok-yeol administration do the same?

Heo Man-seop, Professor at Gangneung-Wonju National University

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