The Small Ball Launched by Hyundai Motor... The Core of Labor-Management Conflict: 'Retirement Age Extension'

Hyundai Motor Union Demands Retirement Age Raised to 64
Retirement Age Extension Emerges as Major Labor-Management Conflict
Unavoidable Trend... Wage Peak Proposed as Solution

The Hyundai Motor labor union is increasingly likely to go on strike for the first time in five years. This is because the gap between labor and management over the extension of the retirement age has not been narrowed.

One of the demands the union insists it cannot concede in this round of wage and collective bargaining negotiations is to raise the retirement age from the current 60 to 64. The union argues that workers need to continue working until they reach 65, the age at which they can receive the national pension, to avoid income gaps. The starting age for receiving the national pension is currently 63, and it will increase to 64 in 2028 and 65 in 2033. Even after about three months of negotiations, the parties failed to reach an agreement, and talks were once broken off midway.

(Photo by Hyundai Motor Union)

Retirement Age Extension Emerges as the Biggest Labor-Management Conflict Issue

The labor movement has consistently advocated for extending the retirement age. The Federation of Korean Trade Unions (FKTU) is currently conducting a 'National Consent Petition' aimed at revising the law to raise the minimum retirement age from 60 to 65. The Hyundai Motor union has also been demanding an extension of the retirement age for several years.

At the negotiations in July, Ahn Hyun-ho, head of the Hyundai Motor union branch, said, “Considering the social atmosphere and surrounding environment, extending the retirement age is an unavoidable issue,” and urged, “The company may have burdens, but we ask for a decisive decision.” In response, CEO Lee Dong-seok said, “It is difficult to gain social consensus on extending the retirement age,” and added, “We must not cause pain to customers and the public.” Earlier, when CEO Lee drew a firm line by saying “absolutely not” to the retirement age extension proposal, the union’s negotiation team members all walked out of the meeting.

The Hyundai Motor management cites three main reasons for rejecting the retirement age extension. First, there is concern it may be seen as an attempt to extend the vested rights of a minority of large company unions. Second, given the politically intertwined situation, it is not a matter that can be decided unilaterally. Third, due to industrial transformation such as electrification, a reduction in manufacturing personnel is inevitable, so extending the retirement age is inappropriate. They also argue that with generational conflicts?where younger employees view the extension negatively?it is not a decision to be made hastily.

In 2021, the nationwide Metal Workers' Union, Hyundai Motor, Kia Motors, and Korea GM, the three completed car manufacturers, held a press conference on the 3rd in front of the National Assembly in Yeouido, Seoul, urging legislation for retirement age extension linked with the National Pension Service. Photo by Moon Honam munonam@

No large company has yet accepted the demand to extend the retirement age due to cost burdens. The Korea Economic Research Institute estimates that raising the retirement age from 60 to 65 would result in additional employment costs of 15.9 trillion won annually. Direct costs amount to 14.4 trillion won, and when indirect costs such as the four major social insurance premiums are added, the burden reaches this level. As labor costs increase, new hiring inevitably decreases.

A 2020 survey by the Korea Development Institute (KDI) showed that after the law setting the retirement age at 60 or older was implemented in 2016, for every one additional older worker (aged 55-60) employed due to the retirement age extension, youth employment (aged 15-29) decreased by an average of 0.2 persons.

Solutions for Retirement Age Extension... A Practical Alternative is the Wage Peak System

Extending the retirement age is an unavoidable challenge. South Korea is soon to become the 'oldest country' in the world. According to Statistics Korea, the proportion of elderly population is expected to reach 37.4% in 2045, surpassing Japan’s 36.7%. The best safeguard for the elderly population is extending the retirement age. Earlier this year, the government announced plans to promote social discussions on continued employment, including extending or abolishing the retirement age.

With the working-age population (ages 15-64) projected to decline from 37.63 million in 2019 to 24.19 million in 2050, the economic activity of the elderly will become increasingly necessary. If the upper limit of the working-age population is not raised, the corporation Republic of Korea will inevitably face bankruptcy due to a shortage of workers.

To actively promote the extension of the retirement age, the burden on companies must be reduced. There are suggestions to shift from a seniority-based wage system to a job- and performance-based wage system or to encourage a 'retirement age extension-type wage peak system.' Since the former is difficult due to Korea’s cultural characteristics, more emphasis is placed on the latter. The retirement age extension-type wage peak system reduces wages from a certain age in exchange for extending the retirement age for a certain period. According to data published last year by the Small and Medium Business Venture Research Institute, among companies with a retirement age system, 21.8% of small and medium enterprises and 52% of large companies operate a wage peak system.

The origin of the wage peak system is Japan, a 'forerunner country' in aging. Japan legally mandates securing employment up to age 65 through methods such as abolishing the retirement age, extending it, or re-employing workers as contract employees. Japanese companies reduce wages by 20-30% around the age of 55 through labor-management agreements and pay about half the wage level after age 60. Extending the retirement age is a global trend. Germany plans to raise its current retirement age of 65 to 67 by 2029. The United States and the United Kingdom have no retirement age system at all, having abolished it due to age discrimination concerns.

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