Kim Deok-ho, Standing Member of the Economic and Social Council, "Extension of Retirement Age Benefits Only for Large Company Workers... 'Continuous Employment' Needs Discussion"

Asia Economy Interview
Extension of Retirement Age Without Wage System Reform Will Lead to Reduced Youth Employment

"Simply extending the retirement age to 65 will only benefit existing workers employed at large corporations and public enterprises with labor unions. It is an act that gives despair to the youth. Extending the retirement age without restructuring the wage system to reflect job changes and reduced working hours is impossible."

Kim Deok-ho, a standing member of the Economic, Social and Labor Council, cited 'wage system restructuring' as a prerequisite for extending the retirement age. He pointed out that if the retirement age is extended without changing the wage system, only workers at large corporations and public enterprises with well-organized unions will benefit, which will inevitably lead to a reduction in youth employment at these large corporations and public enterprises.

Kim Deok-ho, Standing Member of the Economic, Social and Labor Council, is being interviewed on the 8th at the Economic, Social and Labor Council in Jongno-gu, Seoul. Photo by Kang Jin-hyeong aymsdream@

Retirees from Large Corporations Are Not at a Level of Poverty Concern

On the 8th, at the Gwanghwamun office of the Economic, Social and Labor Council, Kim expressed his opposition to the recent labor demands for extending the retirement age to 65, calling it "unrealistic" and providing detailed reasons against it.

On the 16th of last month, the Federation of Korean Trade Unions (FKTU) submitted a national petition to delay the retirement age from 60 or older to 65 or older, stating that it should be aligned with the start age for old-age pension benefits to prevent old-age poverty and improve the quality of life for the elderly. As of the 12th, the petition had over 39,500 signatures. However, Kim criticized the extension of the retirement age to alleviate poverty among the elderly as "detached from reality." He emphasized, "The main rationale is to address the income cliff faced by the elderly who have been unemployed for a long time or are in unstable employment in the external labor market. However, the places where unions demand retirement age extension are public enterprises and large corporations, and those retiring there can live on retirement pensions or private pensions, so they are not facing poverty."

Kim further explained, "As of last year, the retirement age at companies with 300 or more employees is 60.2 years, while for those with fewer than 300 employees it is 61.5 years; at workplaces with unions it is 60.1 years, but at those without unions it is 61.8 years." He added, "This means that small and medium-sized enterprises without unions suffer from labor shortages and often voluntarily extend retirement ages or continue employment." Therefore, extending the retirement age may reduce the effect of continued employment for workers at workplaces with fewer than 300 employees, which account for 86% of all workers.

Kim diagnosed that in Korea, where seniority-based wage systems are strong, productivity generally decreases while wages increase as retirement approaches. Therefore, wage system restructuring must precede continued employment, including retirement age extension. He argued, "If the wage of a worker with less than one year of service is set at 100, the wage for those with over 30 years of service is 295 in Korea, 227 in Japan, and 165 in the European Union, indicating that Korea’s level is relatively high." He added, "Banks offering large retirement bonuses of 500 million won while conducting voluntary retirement means that the productivity of workers at retirement age is low." In this context, if the retirement age is extended without reducing wages, companies may lose the capacity to hire three new young employees. Ultimately, unconditional retirement age extension forces both the elderly and youth into a 'zero-sum game' of job competition.

Extending Retirement Age Alone Is Not the Answer to Continued Employment... Various Methods Must Be Discussed

From September 2021 to February last year, during the Moon Jae-in administration, the Economic, Social and Labor Council conducted discussions through the 'Aging Society Response Research Group' on expanding the utilization of elderly workers and improving employment conditions. Topics included the impact of mandatory retirement at 60 and the necessity of wage system restructuring prior to employment extension. The research group defined employment extension as extending employment through reemployment after terminating the existing employment relationship. Thus, extending the retirement age is one method of employment extension.

However, the 'Super-Aged Society Continued Employment Research Group,' launched on the 27th of last month, uses the term 'continued employment' instead of employment extension based on terminating the employment relationship. This implies discussing various ways to continue employment beyond just extending the retirement age. Kim explained, "The public generally perceives retirement age extension positively as simply lengthening employment periods, but underlying this are different interests among large corporations, small and medium enterprises, unionized and non-unionized workplaces." He added, "Continued employment means discussing various employment methods for all elderly workers, not just retirement age extension favorable to large corporations."

The research group, co-chaired by Kim, is focusing on Japan’s 'Measures to Secure Employment of Elderly Persons.' In 2007, Japan mandated employment security measures up to age 65 and extended this age to 70 in 2021. Kim introduced, "Japan’s measures support various methods such as extending or abolishing retirement age, reemployment systems, and allowing elderly workers to work through outsourcing contracts or social contribution projects if they wish. After implementing the employment security measures at 65, 81.2% of companies use reemployment systems rather than retirement age extension."

The research group plans to present the discussion results, including various methods and issues for realizing continued employment, to the government by the end of this year. The group is composed mainly of academics without labor union participation, driven by a sense of urgency that 'continued employment discussions can no longer be delayed.' Kim said, "The issue is not how to bring labor unions into social dialogue but that the two major trade unions representing all workers must fulfill their social responsibility." He expressed hope that "even after the research group’s results are released, labor unions will participate and social dialogue on continued employment will take place."

Kim Deok-ho, Standing Member of the Economic, Social and Labor Council, is being interviewed on the 8th at the Economic, Social and Labor Council in Jongno-gu, Seoul. Photo by Kang Jin-hyeong aymsdream@

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