[Population Cliff]⑧Differentiated Minimum Wage by Age... Can Increase Jobs for the Elderly

Labor Shortage Due to Decline in Working-Age Population... Welfare and Fiscal Burdens Also Increase
Need to Introduce Age-Differentiated Minimum Wage and Extend Retirement Age Centered on Job-Based Pay System

Editor's Note'Total fertility rate of 0.75 in Q2, half of the population over 65 in 50 years, population of 21 million in 100 years.' This is the current state of South Korea, which is cited as the first country on Earth to disappear due to rapid low birthrate and aging. Experts point out that policy goals should focus not merely on raising the fertility rate itself but on creating a child-rearing friendly environment through support for caregiving, thereby reducing the burden on parents for childbirth and parenting. Since the decline in the working-age population is inevitable, it is time to seek a proactive policy shift in response to the population structure reversal. Opinions have been raised that the utilization of elderly labor should be increased through differentiated minimum wages by age and the introduction of retirement extension centered on job-based pay systems, and that preparations should be made for the transition to a multicultural society by expanding the acceptance of foreign immigrants to maintain population and secure labor force.

[Asia Economy Sejong=Reporter Kwon Haeyoung] To alleviate labor shortages and the expansion of welfare and fiscal burdens caused by population aging, it is necessary to increase the labor participation rate of elderly workers. Differentiated minimum wages by age and retirement extension centered on job-based pay systems can be alternatives.

First, the statutory minimum wage for seniors aged 65 and over can be lowered to create jobs for the elderly in the private sector. This creates a virtuous cycle of 'reduced minimum wage for the elderly → increased elderly employment → increased elderly earned income and reduced poverty rate.' In fact, major countries significantly differentiate minimum wages by industry, region, and age. The UK, France, and Chile apply minimum wage systems differently according to age; in Chile, the minimum wage is lowered for workers under 18 and over 65.

Choi Byungcheon, head of the New Growth Economy Research Institute, said in his book Good Inequality, "The most effective way to create jobs for the elderly in the private sector is to reduce the statutory minimum wage by 20-40% only for seniors aged 70 and over," adding, "However, since there are some concerns, it is desirable to introduce it in the form of a sunset clause."

Extension of the retirement age, currently at 60, can also be considered. In Japan, the retirement age is 60, but since 2006, the government has mandated companies to guarantee employment until 65. Since last year, it has recommended providing opportunities to work until 70. However, extending the retirement age may provoke intergenerational conflicts by aggravating employment difficulties for the youth and increase the burden on companies. Therefore, it is necessary to implement this together with reforming the current seniority-based pay system into a job-based pay system.

The need to improve productivity through labor participation of the elderly population is due to the growth rate. According to a report titled Analysis of the Impact of Population Structure Changes on Economic Growth by the National Assembly Budget Office, an analysis of OECD member countries from 1960 to 2019 showed that when the population aged 65 and over increased by 1 percentage point and the population aged 30-64 decreased by 1 percentage point, the average annual growth rate fell by 0.38 percentage points. However, as governments of various countries have introduced aging countermeasures, the negative impact on growth rates has decreased. The decline in growth rates due to aging in OECD member countries was 0.47-0.54 percentage points annually before the 2000s but narrowed to 0.19-0.25 percentage points after 2000.