[Viewpoint] Let's Promote 'Reemployment' After Retirement

From 1989 to 1992, the number of test-takers for the College Scholastic Ability Test (CSAT) hovered around one million each year. Those born between 1971 and 1974 entered university in the early 1990s and graduated during the period when South Korea received bailout funds from the International Monetary Fund (IMF) amid the foreign exchange crisis. They are the first generation to have traveled abroad freely in their twenties, experiencing overseas language study and backpacking trips. They are now in their early to mid-50s and represent the largest segment in the overall population pyramid.

Alongside them, the preceding age group born between 1964 and 1970 is referred to as the second baby boom generation (born 1964?1974). The population of this second baby boom generation is approximately 9.54 million, accounting for 18.6% of the total population. Those born in 1964 turned 60 this year, reaching the statutory retirement age. Starting with them, the second baby boom generation will consecutively leave the workforce over the next decade.

The retirement of this group will lead to a decline in the working-age population. According to Statistics Korea’s future population projections, the working-age population is expected to decrease by an average of 320,000 annually in the 2020s and by 500,000 annually in the 2030s. For the next five to six years, the number of people leaving the workforce each year will be equivalent to the population of Jinju City (about 330,000), and thereafter, the scale will be comparable to the population of Pohang City (about 490,000).

There are significant concerns that the departure of the second baby boom generation will cause labor shortages in industrial sectors. Since consumption tendencies tend to sharply decline after retirement, this could accelerate a contraction in consumption. The resulting decrease in economic dynamism will be clearly reflected in economic growth rates.

According to a report by the Bank of Korea titled “Economic Impact Assessment of the Second Baby Boomers Entering Retirement Age,” if the employment rate of those in their 60s remains at last year’s level, the growth rate is projected to decline by 0.38 percentage points annually over the next 11 years. However, if the employment rate of those in their 60s rises to levels seen in countries like Japan, which actively supports reemployment of older workers, the growth rate would only decrease by 0.16 percentage points.

To mitigate the inevitable low growth caused by low birth rates and aging, the primary approach is to encourage older adults to remain in productive activities longer. Healthy older adults have competitive advantages over younger workers in terms of job skills and loyalty to their companies. For middle-aged and older adults with increased life expectancy, maintaining income until at least age 65, when they can begin receiving national pension benefits, is crucial to preventing the onset of poverty in old age.

Voices from both the government and political circles are calling for raising the statutory retirement age to 65. However, there is considerable opposition arguing that uniformly extending the retirement age without considering the circumstances of industries or workplaces could excessively increase labor costs for companies. Among younger generations, dissatisfaction may arise with the perception that older generations are monopolizing good jobs. Moreover, since many workers retire early without even reaching the current statutory retirement age of 60, critics argue that simply raising the retirement age may not be effective.

For these reasons, proposals to promote reemployment rather than extending the retirement age are gaining traction. However, for reemployment of retirees to be properly implemented in workplaces, the seniority-based wage system must be overhauled. Establishing a wage system that differentiates jobs suitable for older workers and compensates based on productivity is essential for reemployment to take root naturally.

The government must prioritize older adults as a key target in workforce policies. Social consensus should be reached to develop a reemployment system suited to Korea’s realities. Enabling older adults to earn wages through productive activities and continue consuming is also a way to reduce the burden on younger generations.