Korea Employers Federation: "To Encourage Older Workers, Abolish Seniority-Based Pay Instead of Raising Retirement Age"

Since the retirement age was legislated as 60 in 2013, employment of older workers has increased, but a survey found that qualitative improvements have been insufficient. Amid discussions about further extending the retirement age due to aging, there are calls for a multifaceted approach, including reforming the wage system.

According to a report released by the Korea Employers Federation on the 14th, the economic activity participation rate and employment rate of older workers aged 55 and above have steadily increased since 2013. Last year, the economic activity participation rate of older workers rose by 4.8 percentage points and the employment rate by 4.3 percentage points compared to 2013. These rates are about twice as high as those for the entire population aged 15 and above.

In 2021, officials from each completed car branch of the National Metal Workers' Union held a press conference urging legislation related to retirement age extension. Photo by Mun Ho-nam munonam@

However, a significant portion of older employed persons were found to be temporary or daily workers or self-employed. The proportion of regular workers among older workers was 35.1%, lower than the 65.6% for the 15-54 age group. The proportion of self-employed without employees was also 31.7%, more than twice as high as other age groups.

It is also notable that early retirement is increasing more than retirement at the statutory retirement age. The number of retirees at the statutory retirement age increased from about 285,000 in 2013 to 417,000 last year. Meanwhile, early retirees due to voluntary retirement, recommended resignation, or dismissal increased significantly from 323,000 to 569,000 during the same period. The Korea Employers Federation explained, "In a seniority-based wage system, wages increase sharply with longer tenure, which may incentivize employers to encourage voluntary retirement or other early retirement measures."

The Korea Employers Federation predicted that extending the statutory retirement age would not only increase corporate costs but also exacerbate the dual structure of the labor market and intergenerational job conflicts. According to government data, 55.2% of workplaces with 100 or more employees and 67.9% of workplaces with 1,000 or more employees use a seniority-based wage system. It was pointed out that only certain groups, such as regular workers in large companies with unions, benefit from the retirement age being extended to 60.

Comparison of Working Condition Gaps between Unionized, Large Corporation, Regular Employees and Non-Unionized, Small and Medium Enterprise Workers

Considering the impact of extending the statutory retirement age on the labor market over the past 10 years, the Korea Employers Federation argued that the wage system should be reformed to focus on job performance and results. The excessive seniority-based wage system, where longer service leads to higher wages, has increased the burden on companies to employ older workers, which has consequently narrowed employment opportunities for young people. Japan has mandated measures to secure employment for older workers up to age 65 but has maintained the statutory retirement age at 60 since 1998.

Lim Young-tae, head of the Social Policy Division at the Korea Employers Federation, said, "This year, the issue of ‘retirement age extension’ has become a trigger for strikes in the field," adding, "The scars from the legislation of the retirement age at 60 ten years ago have not yet healed, and further extending the statutory retirement age could cause greater frustration among young people who have not yet found employment."

He also stated, "Discussions about retirement age without prior reform of the wage system could impose a heavy burden on companies," and emphasized, "The seniority-based wage system from the industrialization era, which has served its purpose, must be abandoned."

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