Business Community: "Retirement Age Extension Would Cost Companies 30 Trillion Won... Reemployment Is Better Than Extension"

KEF's "Labor Market Tasks for Expanding the Utilization of Older Workers"
"A Uniform Statutory Extension of the Retirement Age Should Be Avoided"

The business community has argued that, instead of a uniform extension of the statutory retirement age, post-retirement reemployment should be promoted.

The Korea Employers Federation stated this position on May 1 in its report titled "Labor Market Tasks for Expanding the Utilization of Older Workers."

The report noted, "Recently, demands for extending the statutory retirement age have been growing, led by labor unions and political circles, citing reasons such as the entry into a super-aged society." It emphasized, "The 2013 legislation setting the retirement age at 60 has actually intensified negative side effects in the labor market, rather than improving employment stability for older workers. Therefore, any further statutory extension of the retirement age should be avoided."

The report pointed out that, since the full implementation of the retirement age of 60 in 2017, the burden on companies regarding older workers has increased significantly. In particular, the wage peak system, which companies adopted as a last resort to alleviate the heavy burden of the mandatory retirement age of 60, has since 2022 become a source of litigation risk, further increasing confusion in the workplace.

Since 2013, the rate of increase in early retirees has been much higher than that of statutory retirees. The number of early retirees who left their main jobs due to voluntary retirement, recommended resignation, or layoffs for management reasons rose from 323,000 in 2013 to 605,000 in 2024, an increase of 87.3%.

In addition, human resource bottlenecks in the workplace have led to a growing reluctance among younger employees to seek promotion. The spread of free-rider behavior among middle-aged and older employees?meaning a lack of interest and effort in work?is also undermining organizational vitality and negatively impacting productivity.

In response, the Federation stated, "Given the high seniority-based wage system, low employment flexibility, the dual structure of the labor market, and youth unemployment in our labor market, a uniform statutory extension of the retirement age should be avoided."

The report stated, "Artificially extending the statutory retirement age primarily benefits large companies with unions and public institutions, thereby deepening the dual structure of the labor market. It can also worsen youth employment and fuel intergenerational conflict over jobs. Considering Korea's high seniority-based wages and rigid employment practices, it is a reality that even large companies, let alone small and medium-sized enterprises, would find it difficult to bear the costs."

Recently, labor unions have been demanding that the statutory retirement age be extended to 65. According to the Korea Economic Research Institute, if the extension becomes mandatory, the annual cost (wages and four major insurance premiums) of employing 590,000 regular workers aged 60 to 64 would reach 30.2 trillion won. This is equivalent to the cost of employing 902,000 young people aged 25 to 29.

The Federation emphasized, "In order to minimize the corporate burden of utilizing older workers and the negative impact on youth hiring, it is most realistic to first implement effective measures for 'wage system reform,' and then pursue an older worker employment policy centered on 'post-retirement reemployment.'"

The report also stated that, considering the increasing proportion of older workers within companies, a "selective reemployment" system should be introduced, guaranteeing companies the authority to select reemployment candidates. At the same time, companies' voluntary efforts and government policy support should be strengthened to make it easier for older workers who are not rehired to find new employment.

Lim Youngtae, head of employment and social policy at the Federation, said, "Labor unions are intensifying their demands to extend the retirement age to 65, but if the statutory retirement age is extended uniformly and mandatorily, companies will inevitably have less capacity to hire new employees." He stressed, "Rather than extending the statutory retirement age, we should promote post-retirement reemployment to secure work opportunities for older people while also guaranteeing jobs for young people, actively considering this as a way for different generations to coexist."