Koreans to retire at age 60

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Koreans to retire at age 60

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The National Assembly moved a step closer yesterday to raising Korea’s retirement age to 60, an epochal change for an aging society and for Korea’s companies.

Lawmakers on the legislative subcommittee of the National Assembly’s Environment and Labor Committee yesterday passed a bill aimed at revising the current law to force private and state-run companies to guarantee employment until workers are 60 years old. As of now, a retirement age of 60 is a mere recommendation for private companies, which is widely avoided.

The subcommittee held a meeting Monday to address the change, and ruling and opposition lawmakers agreed on the need to adopt a statutory retirement age.

They met again yesterday and agreed that large businesses that employ more than 300 workers and state-run enterprises must adopt a retirement age of 60 starting Jan. 1, 2016. Smaller companies and central and local governments will introduce the new retirement age by Jan. 1, 2017.

Adopting a statutory retirement age of 60 was a pledge of both the ruling and opposition parties during the December presidential election, and the votes of aging baby-boomers were a big part of the victory of President Park Geun-hye.

Korea’s baby-boomers are struggling because companies retire them years before their national pensions start paying out at the age of 60 or 61. Although the average retirement age of local companies is 55, Korean workers consider it to be 48.8, according to a survey by an employment portal Job Korea.

The actual retirement age at small and medium enterprises was 48.2 years old. Every year, an average of 150,000 baby-boomers retire.

The average retirement age in Japan is 65, and it is in the process of raising pension eligibility from 60 to 65. The United States has a retirement age of 65. In Organization for Economic Cooperation and Development nations, the average retirement age is between 63 and 64 years of age.

The revised bill must be passed by the Environment and Labor Committee, the Legislative and Judiciary Committee and a main voting session.

In order to lessen the burden on companies, the revised law will allow employers and labor unions to take measures to restructure their salary systems when they extend the retirement age. The ruling and opposition parties are divided over how to address the sensitive issue of introducing a salary peak.

Under a salary peak system, an employer will offer a lower wage to a worker after a certain age, in return for guaranteeing employment until 60.

The Saenuri Party initially argued that a salary peak should be introduced at the same time as the statutory retirement age. The opposition Democratic United Party said employers and unions should decided on the adjustment on their own.

The bill approved by the subcommittee yesterday was a compromise allowing employers and labor unions to work on salary adjustments. It did not explicitly require a salary peak system.

The business community was alarmed by the legislature’s move.

The Korea Employers Federation yesterday said a statutory retirement age will lead to fewer jobs for young people.

“The average retirement age of large companies is currently 57.4,” it said. “With a 60-year-old statutory retirement age, companies won’t be able to hire new employees for those additional three years.”

According to a survey conducted last year by the Ministry of Employment and Labor, the net employment of 372 companies, each of which has more than 300 workers and extended the retirement age, went down by 3.7 percent.

“If the retirement age is extended suddenly and drastically, companies will become reluctant to offer new jobs,” said Kim Jung-sik, professor of business administration at Yonsei University.

The business community also said a compulsory retirement age will snowball companies’ payroll costs. The average worker who serves more than 20 years in a company receives a salary more than double that of a first-year rookie, the federation said. It said Korea’s figure was far higher than the 130 percent of European companies.

Labor unions yesterday welcomed the legislature’s move, but disagreed with the idea of a salary peak.

In a statement, the Korean Confederation of Trade Unions said the extended retirement age is desirable because of the fast aging work force.

“The economically productive population between 15 to 64 years of age will peak at 37.04 million in 2016 but will decline from there,” the statement said. “In four to five years, the number in the work force will go down. To prepare for such a situation, the extended retirement age is an effective way.”

The group said introducing a salary peak will only drive wages down. “Instead of guaranteeing higher wages, cutting salaries in return for extending retirement is undesirable,” it said.

By Ser Myo-ja [myoja@joongang.co.kr]

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