Consensus comes firstPresident Moon Jae-in proposed extending the employment term currently capped at the age of 60 in the public sector. Increasing the retirement age has suddenly come up as an issue ahead of the April 15 parliamentary elections. It could be tailored to those nearing retirement age who tend to be conservative. The discussion is necessary in a society which is aging at the fastest pace in the world. Better use of the veteran work force is required as the working population started thinning in 2018.
Few would oppose the idea itself. But the devil is in the details. First of all, extension in retirement age should be pursued in line with works to hone productivity and overhaul the wage structure. In the current Korean wage system that pays by seniority rather than performance, companies cannot afford lengthier employment terms that do not improve productivity. Japan, famous for lifelong employment, has been shifting to wages based on performance. In 2004, Toyota abolished the age-connected pay system. The labor reform helped pave the way for an extension of the retirement age.
But we are hardly ready. Korea is the world’s 12th largest economy, but ranks 130th in labor flexibility. The National Assembly in 2013 pushed the retirement age from an average 55-58 to 60 without thorough reviews. It should have institutionalized the peak wage system at the time, but it did not. Companies could not lower wages due to powerful unions. As a result, new hiring sagged, causing the youth unemployment rate to jump to 10 percent in 2016 from 9.1 percent in 2015.
Younger people will find it harder to get jobs if the retirement age is pushed beyond 60. The government considered forcing companies to extend the retirement age, but dropped the plan in September last year due to the ramifications on youth employment.
The extension in employment age will only strengthen jobs and the position of 1 million government employees and 2 million working for large companies, financial institutions and public enterprises that are under the country’s two umbrella trade unions. Before revising the retirement age, labor market reform should take place. Only when dismissals and rehiring become easier, changes in the retirement age can come. Otherwise, the seniors will only be enjoying the benefits at the expense of their employers and young people.
JoongAng Ilbo, Feb. 13, Page 30