The Solution to the Retirement Age Running on Parallel Lines... "Hasty Legislation is a No-Go" [Why&Next]

The Committee on Continued Employment Launched in June Last Year
Differences Exist Even Within Labor and Management
ESLC: "Conclusion and Plan Announcement by April"
Guidelines Likely to Be Presented

Discussions on retirement age reform have intensified since last year centered on the Economic, Social and Labor Council (ESLC), a social dialogue body directly under the President. However, reaching a conclusion remains difficult. This is because there are differences in positions between labor and management, and the calculations differ between middle-aged and young workers in the labor sector, and between large corporations and mid-sized/small and medium enterprises (SMEs) in the management sector. The ESLC plans to announce a plan by April. Rather than concluding with legislation uniformly applied to all companies, there is a prospect that guidelines to lead further discussions may be presented. Experts advise that, as is currently the case, companies should autonomously handle reemployment after retirement, while reforming the wage system and gradually extending the statutory retirement age (60 years old).

Job seekers looking at the job posting board at the '2024 Incheon Job Fair' held in the central hall of Incheon City Hall, Namdong-gu, Incheon, last November. Photo by Yonhap News

Confusion over retirement age discussions continues... ESLC determined to conclude by April

The Committee on Continued Employment held its 16th public meeting on the 25th at the ESLC's main conference room in Jung-gu, Seoul. The Committee on Continued Employment is a subcommittee under the ESLC established to discuss employment and labor system construction measures in response to demographic changes such as low birth rates and a super-aged society. It was launched in June last year and operates mainly with representatives from labor, management, government, and public interest members.

On this day, the Committee on Continued Employment coordinated issues related to retirement age discussions. They examined how to extend employment, whether to change the wage system, and whether adjustments to wages, duties, or working hours are necessary. Although two public interest members recommended by labor and management respectively resigned last month, creating a vacancy, discussions have continued almost weekly through public meetings.

However, since the emergency martial law situation in December last year, the Korean Confederation of Trade Unions (KCTU), representing labor, has suspended dialogue, making it difficult to accelerate discussions. The KCTU has indicated it will clarify its return by March, but even if it returns, only three months remain until the committee's end in June. A government official explained, "Even if labor agrees with management's claims, it is difficult to smoothly reach an agreement without the unions," adding, "The same applies to management."

Moreover, opinions are divided even within labor and management. Unions mainly composed of middle-aged workers are advocating for extending the retirement age to 65 without wage cuts. However, in this case, hiring in the primary labor market, such as large corporations and public institutions, may shrink, worsening youth employment indicators. In fact, research by the Korea Labor Institute and the Korea Development Institute (KDI) has shown that retirement age extension reduces youth employment.

There is no suitable communication channel to reflect youth opinions. The ESLC attempted to establish a youth committee as a subcommittee by demographic group but suspended related discussions. An ESLC official explained, "Discussions on forming demographic subcommittees reached the final stages, but the KCTU's absence from official meetings blocked further discussions." They also anticipated, "(If the KCTU returns in March,) demographic subcommittees by age will be formed."

Management's stance varies depending on company size. Large corporations argue that reemployment after retirement should be based on reforming the seniority-based wage system. Mid-sized and small and medium enterprises demand the freedom to autonomously choose various employment methods rather than being subject to uniform systems applied together with large corporations. Since wages are not as high as in large corporations and many face labor shortages, they argue that employment systems should be adaptable to different management circumstances.

The ESLC intends to conclude related discussions by April even if consensus is difficult. Given the possibility of an early presidential election following the impeachment crisis and the upcoming end of the Committee on Continued Employment, postponement is not an option. ESLC Chairman Kwon Ki-seop stated on the 20th, "(If the KCTU) organizes its position and returns in March, we requested that discussions be held until April," adding, "If the union does not participate, the public interest members will summarize and announce the discussion contents."

The 'Continued Employment Korea-Japan Joint Seminar' held by the Economic, Social and Labor Council on the 17th. Provided by the Economic, Social and Labor Council

Various market cases... "Retirement age extension should be promoted gradually along with wage system reform"

Experts evaluated that even if the ESLC does not reach a perfect agreement, issuing guidelines would help future additional discussions. They also advised the government to pursue gradual changes, referring to precedents in Japan and Singapore. Instead of rapidly pushing for uniform retirement age extension, the approach should be to reform the wage system and gradually extend the statutory retirement age (60 years old).

Some companies have voluntarily introduced retirement age extension systems. According to the Korea Employers Federation, Dongkuk Steel extended its retirement age from 60 to 61 in 2022 and further raised it to 62 in March last year. Crown Confectionery and Incheon International Airport Corporation also extended their retirement ages to 62 and 61, respectively. Among mid-sized companies, Soshin Passenger Transport increased its retirement age from 60 to 65 in two phases between 2016 and 2019, and Daejin Passenger Transport raised its retirement age to 63 starting in 2023.

Although not extending the retirement age, some companies achieve the effect of extension through reemployment after retirement. Hyundai Motor Group is a representative example. Hyundai Motor has operated a 'Skilled Reemployment' system since 2019 for technical (production) retirees, and Kia has operated a 'Veteran' system for reemployed retirees since 2020. The reemployment period was originally one year but has been extended to two years and expanded to include sales positions. POSCO agreed with labor to reemploy 70% of retirees in 2023 and currently operates a post-retirement reemployment system. Employment periods are renewable annually up to two years.

Professor Lee Soo-young, Special Professor at Korea University's Institute for Aging Society, said, "The ESLC should present a proposal that narrows differences as much as possible so that even if it goes to the National Assembly later, discussions can start from there," adding, "Even if consensus is not reached, clarifying the issues sufficiently before going to the National Assembly can reduce both the time for discussions and the gap in opinions between labor and management."

She also explained, "Japan and Singapore had strong seniority-based wage systems like ours, and as a result, they chose reemployment methods over retirement age extension," adding, "Initially, even if reemployment is used, as the proportion of elderly workers increases and youth decreases, the retirement age is gradually extended. If retirement age extension is pushed from the start, many companies cannot sustain it."