Adoping a grey workforce
Debate begins on raising retirement age
By Kim Jae-won
As concern grows on whether the country is on the road toward a demographic time bomb, there is passionate debate between policymakers, employers and workers on how the economy should cope with the aging workforce.
One of the most controversial subjects discussed is whether the country should raise the retirement age to 60 in order to combat higher pension costs and defuse the threat of widening retirement poverty.
Most Korean workers retire between the ages of 55 and 58, but politicians, eager to appeal to voters ego in an election year, are talking about a mandatory retirement age of 60 in all companies and extending it to 65 or 70 by 2020.
Predictably, the idea came under heavy attack from lobbyists in the business sector alarmed by the thought of rising payrolls. There is also a lukewarm response from the massive number of school leavers and graduates sidelined from the labor market, suggesting that a generational conflict is brewing over employment policies.
Even without political enforcement, some companies, including POSCO, Hyundai Heavy Industries, GS Caltex and Home Plus, have recently raised the retirement age of their employees to 60 after their labor unions agreed to accept increased flexibility in terms of payment structures.
The Royal Bank of Scotland (RBS) recently published a study that found Korea has the fastest aging population on the planet and that its working-age population will contract beginning in 2016.
Korea’s total fertility rate, or the average number of children women have during their childbearing years, is expected to register at 1.23 from 2010 through 2015, Suh said, continuing to be one of the lowest in the world. The figure for the U.S. during the period is expected to be 2.08, 1.46 for Germany and 1.42 for Japan. Korea’s birth rate between 1980 and 1985 was 2.30.
Lawmaker Hwang Woo-yea, leader of the ruling Saenuri Party, earlier this week reconfirmed the party’s commitment to extend the legal retirement age to 60, which continues to be a key campaign pledge ahead of the presidential elections in December.
Extending the retirement age will allow experienced workers to contribute longer to economic growth, provide older citizens with the opportunity to work and reduce pressure on pension funds, Hwang said.
``We will gradually push to make the retirement age of 60 a legal requirement" he said.
``We will advise the public sector and big businesses to carry out the requirement first."
Hwang’s comments may strike a chord with older voters, but it remains to be seen whether they will resonate with younger voters in the same way.
The average retirement age at Korean firms with 300 or more employees was 57.4 in 2010, according to the Korea Labor Institute. More than seven million Koreans known as baby boomers, born between 1955 and 1963, are set to reach that age within the next eight years and account for 14.6 percent of the population.
"Over the long term, we will try to extend the retirement age to 65, as in many advanced nations," Hwang said. "Going forward, we will try to make the retirement system meaningless by extending the retirement age to 70 by 2020."
Hwang’s plan seems similar to what the Organization of Economic Cooperation and Development (OECD) recommends. The Paris-based think tank says that governments need to raise retirement ages gradually to address increasing life expectancy in order to ensure that their national pension systems are both affordable and adequate.
“Bold action is required. Breaking down the barriers to stop older people from working beyond traditional retirement ages will be a necessity to ensure that our children and grandchildren can enjoy an adequate pension at the end of their working life,” said OECD Secretary General Angela Gurria in a June report.
The party chief took note of possible criticism about the negative effects the plan may have on the balance sheets of firms and job creation for younger generations. Hwang, however, said such issues could be tackled through a wider implementation of the salary peak system, which gradually reduces the wages of workers after they reach a certain age in return for guaranteeing more years at work.
However, business leaders are opposed to the idea, saying it will increase the cost of human resources in companies which in turn, will eventually make them reluctant to hire employees.
“A salary for an employee in their 50s is about two to three times that of entry-level workers. The retirement extension law will throw cold water on the whole employment market,” said the Korea Employers’ Federation in a statement. The lobby group of the nation’s businessmen said that the new law will hurt the young generation whose actual jobless rate tops 20 percent.