The peak wage system’s time

The peak wage system is the starting point for labor reform. It is an urgent issue because Korean employees’ retirement age will be extended to 60 starting next year. Workers across the board said the new wage system must be adopted without a hitch, according to a survey of 1,000 employees at workplaces with more than 100 employees. Seven out of 10 stressed the need for the peak wage system - a job-sharing measure aimed at providing longer job security for employees nearing retirement age through a gradual wage reduction after a certain age.

That’s a remarkable development in our labor sector given the respondents’ willingness to cut their salaries for the sake of a few more years on the job. Respondents to the survey said they opted for the new system not only because of job security, but also for the sake of the next generation and their companies’ competitiveness. By taking a pay cut as they approach 60, their companies will be able to hire more people right out of college. Korea’s workers are a striking contrast to those in Greece. They demonstrate a mature sense for the need of coexistence for the greater good of society.

However, labor unions - dominated by salaried workers with fat paychecks from large companies - threaten to block the introduction of the system through a general strike. The hard-line Korean Confederation of Trade Unions announced a plan for a second general strike on July 15. The Federation of Korean Trade Unions, a less belligerent group, is poised to join after vowing a massive walkout for the first time since 1997.

Think tanks have warned about the retirement age being extended to 60 without adopting the peak wage system. According to data from the Korea Economic Research Institute, the corporate sector would have to bear additional costs of 107.1 trillion won ($94.2 billion) from 2016 to 2020 as a result of the extended retirement age. The jobless rate for the young generation also would soar to 16 percent from the current 10 percent range.

Once the peak wage system is introduced, businesses can save 25.91 trillion won. With that money, enterprises can hire 313,200 more regular workers. Reductions in personnel costs lead to stronger competitiveness and more jobs. More jobs for the youth reduce generational conflicts. Despite labor groups’ dismissals of the warnings, workers understand the positive function of the new wage system.

It is time for the unions to answer. The government must offer diverse measures to support them, as they said in the survey.

JoongAng Ilbo, July 9, Page 34