[Exclusive] 'Stop the Job Generation War'... Include Win-Win Employment in Social Mobility Measures

Ministry of Economy and Finance Announces Social Mobility Measures This Month
Disconnected Youth and Middle-aged Employment Support
Linked to Promote 'Generational Coexistence Employment'

Extending Retirement Age May Shrink Youth Employment
Concerns Over Intergenerational Job Competition
Preemptive Measures to Prevent Side Effects Through Coexistence Employment Plans

The government will unveil measures this month to promote mutually beneficial employment between youth and middle-aged workers. This is to minimize the side effects of a shrinking number of jobs for young people amid the trend of increasing continued employment for middle-aged workers due to population aging. The measures include establishing a system to encourage intergenerational mutually beneficial employment, easing the requirements for subsidy support, and implementing an intergenerational mentoring program.

According to a comprehensive report by Asia Economy on the 5th, the Ministry of Economy and Finance is discussing the “2nd Social Mobility Improvement Plan” containing these measures with related ministries. The core of this plan is to redesign the support system to promote mutually beneficial employment between generations. Currently, youth and middle-aged employment support systems operate separately, but going forward, they will be linked through systems or incentives.

An official from the Ministry of Economy and Finance explained, “There have been discussions on continued employment, and many argue that extending the retirement age negatively affects youth employment,” adding, “We are preparing this with the intention of focusing on intergenerational mutual support.” He added, “We are currently reviewing various systems aimed at mutually beneficial employment between youth and middle-aged workers.”

Establishing a Mutually Beneficial Employment System and Forming an Intergenerational Mentoring Culture

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance. Photo by Jo Yong-jun jun21@

The government is planning a mutually beneficial employment incentive system that links the ‘Youth Job Leap Incentive’ and the ‘Continued Employment Incentive.’ The Youth Job Leap Incentive provides 7.2 million KRW per person per year to employers who newly hire young workers, while the Continued Employment Incentive provides 10.8 million KRW per person over three years to employers who continue to employ workers who have reached retirement age. The Ministry of Economy and Finance’s idea is to increase government support by up to 30% for companies that successfully hire youth and continue employing middle-aged workers simultaneously.

Along with this, the government will ease the requirements for companies to receive incentives. For example, to receive the Continued Employment Incentive, companies must accept all workers who wish to continue working. Because of this, companies have complained that it is difficult to receive the incentive. Accordingly, the Ministry plans to revise regulations to allow companies to selectively extend retirement for specific job groups or employees.

However, when announcing the policy, only the direction will be disclosed without detailed content. This is because it is deemed inappropriate to reveal specific institutional improvement directions without social consensus on continued employment. The ongoing discussions on retirement age extension at the Economic, Social and Labor Council were also taken into account. A related official said, “Since we do not know what policies the Economic, Social and Labor Council will propose, this time the government will only express its intention for mutually beneficial employment.”

To increase understanding between middle-aged and young workers and facilitate smooth labor market entry for youth, an ‘Intergenerational Mentoring Program’ will also be promoted. In this program, workers nearing retirement and newly hired young workers form mentor-mentee relationships, and the government supports activity expenses at workplaces. Additionally, for companies that reduce working hours for young employees, the support period for the ‘Work-Life Balance Job Incentive’ will be extended from the current one year.

Risks to Youth Employment and Decline in Social Mobility Due to Retirement Age Extension

The background for the government’s preparation of measures to promote mutually beneficial employment includes concerns about a ‘job war between generations.’ The middle-aged group includes the second baby boom generation (born 1964?74), who will begin retiring this year. Their number is about 9.54 million, accounting for 18.6% of the total domestic population. Most of them wish to continue working after retirement age. According to the supplementary survey on the elderly released by Statistics Korea in July, 69.4% of the 15.98 million elderly aged 55?79 expressed a desire to continue working. Due to the aging trend, by 2072, the elderly population will account for 47.7% of the total. Considering issues such as the depletion of the national pension and elderly poverty, the government has no choice but to activate continued employment.

The problem is that continued employment of middle-aged workers may shrink youth employment. In the second quarter of this year, 22.4% of domestic workers were aged 60 or older, a higher proportion than Japan’s 22.1%. In this situation, if middle-aged workers maintain quality jobs, it may reduce the motivation of the younger generation to work. The number of ‘inactive’ youth in their 20s who are not engaged in any job-seeking activities reached 416,000 as of last September. This is an increase of 69,000 compared to the same month last year, marking the steepest rise in 44 months. There are warnings that a competition for jobs between middle-aged and young workers could unfold.

This could also negatively affect social mobility, which Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, has emphasized since his early days in office. According to a 2019 report by Paul Monin, a researcher at the Federal Reserve Bank of Atlanta, a 1% increase in the employment rate of those aged 55 and older corresponds to a 0.17% decrease in youth occupational mobility. Youth wages decreased by 3%, and the proportion of youth holding high-skilled jobs also declined by 0.6%.

Meanwhile, the government announced the first Social Mobility Improvement Plan last May. At that time, the government stated it would integrate Individual Savings Accounts (ISA) by industry and promote housing pension schemes.