[Retirement Age Extension, Time for Choice] Kim Wisang: "Forcibly Extending Retirement Age Only Reduces Hiring... Wage Reform Must Go Hand in Hand"

Instead of Mandatory Continuous Employment for Companies
Option to Choose Between Retirement Age Extension and Re-employment of Retired Workers
Seniority-Based Pay Must Be Eased When Extending Retirement Age

"In reality, it is impossible to extend the retirement age without easing the seniority-based pay system. If retirement age is forcibly extended, it is obvious that companies will immediately reduce hiring."

Kim Wisang, a member of the People Power Party, criticized the bill proposed by the Democratic Party of Korea to extend the statutory retirement age without wage loss as unrealistic, during a recent interview with Asia Economy regarding the issue of continuous employment. Kim, who is a former member of the Federation of Korean Trade Unions, is currently serving on the National Assembly's Environment and Labor Committee. In March, Kim became the first in the People Power Party to propose a bill related to retirement age extension. The concept of continuous employment includes not only extending the retirement age but also re-employing retired workers.

Kim emphasized that the wage system must be reformed simultaneously in order to achieve continuous employment. He explained that extending the retirement age without reforming the wage system would only deepen the polarization in the labor market. He expressed concern, stating, "Seniority-based pay is mainly implemented in large companies and public enterprises, while many small and medium-sized enterprises do not have a wage system at all. If we only extend the retirement age under these circumstances, the benefits will go exclusively to regular employees in large companies and public enterprises."

Kim Wisang, member of the People Power Party. Photo by the office of Kim Wisang, member of the People Power Party.

Kim judged that the wage system in Korean companies is rigid. He noted that while the annual increase in seniority-based pay was advantageous during the industrialization and high-growth era, when the economy grew by 10% each year, it is no longer sustainable in today's prolonged low-growth environment. He stressed, "Although successive governments have attempted wage system reform, all efforts have failed due to sharp conflicts of interest. There is a world of difference between unilaterally changing the wage system without offering anything in return to workers and improving the system to create an environment where people can work longer after retirement."

These points are reflected in the partial amendment to the "Act on Prohibition of Age Discrimination and Promotion of Employment for Older Persons" that Kim proposed. The amendment would require employers to ensure continuous employment for workers aged 60 and over, but would allow companies to choose between 'retirement age extension' and 're-employment of retired workers.' Kim explained, "The ideal method of employment extension varies by workplace, and companies know their own circumstances best, so we provided options."

This is similar to the case of Japan, where employment extension has been successfully established. Japan also requires companies to ensure continuous employment, but allows them to choose among retirement age extension, abolition of retirement age, and re-employment after retirement. Kim commented, "It is worth referencing because Japan operated an almost identical employment and wage system in an economic structure similar to ours."

Kim also stipulated that if the retirement age is extended, the wage system should be reformed to ease seniority-based pay. He also allowed for the period of employment and wages to be set differently from before retirement, based on agreement between the parties, when re-employing retired workers. The proposal also includes government support measures, such as providing incentives to companies that continue to employ workers. Kim stated, "There can be various methods, but the overall framework must align with seniority reduction and easing of seniority-based pay. These are measures to increase companies' capacity to accept employment extension while minimizing side effects such as a reduction in youth employment."

He also pointed out the urgent need to resolve the income gap between retirement and the start of pension payments. Currently, the age for receiving the National Pension is 63, which is three years later than the statutory retirement age, and this will rise to 65 by 2033.

Kim emphasized, "If we fail to establish a reasonable employment extension policy, it will become a significant burden on our economy and future. We must design the system so that continuous employment either alleviates or at least does not worsen this situation."

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