Avoiding the retirement age trap

The National Assembly’s Environment and Labor Committee rubber-stamped a bill to raise the legal retirement age to 60 from 2016. Raising the retirement age is a global trend along with longer life expectancy.

Longer working lives can prepare society for a shrinking working population in an aging society and create economic benefits by utilizing veteran skilled workers. The age change could lessen the financial squeeze felt by Koreans for nearly 10 years after retiring between 55 to 58 before they reach the eligible age to collect pensions.

Both the ruling Saenuri Party and main opposition Democratic United Party have competitively pledged to raise the retirement age during the presidential campaign. But the parties hurriedly reached a bipartisan agreement on legalizing the change without thorough study and debate. Japan, which attempted to raise the retirement age in 1994, only did so in 1998 after 90 percent of companies gradually accommodated the move.

It is also unclear whether retirement changes would evenly benefit workers. Civil servants and employees in the public sector already retire around 60. Private companies commonly set retirement between 55 and 58, but in reality, workers leave at 53 on average. The change in the legal retirement age could ensure jobs in the public sector and for unionized employees of large companies. But they make up a mere 10 percent of the working population.

Extended working years could also lead to fewer job openings for young people, worsening generational conflicts. In Japan, companies have become old because nearly half of the businesses cannot afford to hire young people due legal obligations related to the retirement age.

What matters most is whether companies can handle the extra cost and burden themselves. The bill leaves room for management and labor to restructure wages following the retirement age change. But the labor sector already proclaimed that wages are not negotiable. We also have to consider the traditional wage benefits according to working years. An employee who has worked more than 20 years earns nearly twice as much as a newcomer in his or her 20s.

Without provisions allowing incremental decreases in salary after a certain age while guaranteeing jobs until retirement, few companies could survive very long. Public and large companies may somehow get by, but smaller companies won’t be able to afford the labor costs.

Even with a bipartisan consensus, the bill should not be hastily approved.

Parties representing labor, management and politicians should further discuss the issues so that they can reach a broader consensus that will benefit society as a whole.