[Retirement Age Extension, Time to Choose] Kwon Kisub, Economic, Social and Labor Council Chair: "Unions Should Concede on Retirement Age, Companies on Seniority Reform"

Kwon Kisub, Chairman of the Economic, Social and Labor Council, is being interviewed by Asia Economy at the Gyeongsanowi office in Jongno-gu, Seoul. Photo by Jo Yongjun

Social conflict over extending the retirement age is intensifying. Concerns about shrinking job opportunities for young people and demands from the elderly for greater job security are at odds with each other. With discussions between labor and management effectively stalled, public interest committee members have independently proposed a direction. The public interest members of the Continuous Employment Committee under the Economic, Social and Labor Council continued discussions even without participation from labor and management, and presented a compromise: the statutory retirement age would remain at the current 60, but from 2033, companies would be required to gradually guarantee continued employment up to age 65. Wages would be adjusted based on productivity and contribution.

The labor community has protested, claiming that the extension of the retirement age has failed, while management has expressed dissatisfaction, saying that wage system reform has not been achieved. Amid divided opinions, Kwon Kisub, Chairman of the Economic, Social and Labor Council, emphasized that this proposal is "the maximum our society can realistically handle." He explained in detail why this proposal has been put forward now and which side it is intended to compromise with. The following is a Q&A with Chairman Kwon.

- What do you think labor and management each need to concede regarding the issue of continued employment?

▲The proposal announced by the public interest committee members made it clear that extending the statutory retirement age, as demanded by labor unions, is difficult. Still, we have secured employment stability for those over 60, so we are asking them to accept the proposal. On the other hand, companies keep insisting that the wage system for all employees should be changed from a seniority-based system to a job performance-based system, but that is difficult at present. Therefore, we suggested that only the wage system for those over 60 should be changed based on productivity.

- Is the proposal from the public interest members of the Economic, Social and Labor Council closer to the management side?

▲That is exactly the kind of claim we are wary of. Our focus was on how to impose the obligation of continued employment for older workers. We deliberated to find a realistically feasible solution. Deciding which side to support was not our criterion. Although the statutory retirement age extension desired by labor was not included, the fact that continued employment is made mandatory shows considerable consideration for the labor side.

- Why did the public interest members announce their proposal first?

▲We could have left it to the new government, but the current public interest members were appointed by the current administration. There was a consensus that it would be better to wrap up the discussions. We also developed agendas and held forums to ensure that what we have done is left in a good state for the new government to discuss. We tried to conclude the current administration well and prepare for a smooth transition to the next one.

- Do you think the management side finds the proposal acceptable?

▲There is dissatisfaction that not enough discretion is given to business owners. However, since this is about signing a new employment contract, the wage system for those over 60 can be newly designed. Some in management are considering whether to use this opportunity to change the wage system for all incumbent employees at once, but that is too ambitious. I think this proposal is about the maximum our society can achieve. Doing more than this could create a very difficult situation.

Kwon Kisup, Chairman of the Economic, Social and Labor Council, is being interviewed by Asia Economy at the Gyeongsanowi office in Jongno-gu, Seoul. Photo by Jo Yongjun

- Wages are an important issue. Why did the public interest committee members leave wage levels to labor-management autonomy?

▲Wages cannot be mandated by law. We cannot set them at 80% or 70%. The public interest members' proposal is for "reasonable wage adjustments based on productivity." In other words, it means wages will be reduced. The standard is productivity, taking into account contribution, performance, and job role. In the future, workers over 60 who want continued employment will have to negotiate with their employer. The employer will insist on strictly assessing productivity. If the worker was already on a performance-based pay system, they will continue to receive performance-based pay. However, those who were on a seniority-based pay system will not be able to continue as before. Even if related disputes arise later, the law will inevitably side with the employer. In South Korea, labor-management relations are particularly strained, so there is an expectation for the government to decide everything, but it is impossible for the government to set wages for every industry and job in every company.

- Do you consider adjusting wages through labor-management autonomy to be a reform of the wage system?

▲Employers will have to study productivity. Through the HR department, they will analyze how much production each worker contributes and how much of the sales and profits are attributable to each worker. Currently, this is not being done. Neither employers nor unions are logically assessing worker productivity, but now we are suggesting that it should be done. That is how wage system reform is achieved?not by someone else setting it. Also, I expect that the wages of those who continue to be employed after 60 will influence the company as a whole, setting a new rule. Workers under 60 will also be able to estimate in their minds the wage corresponding to the productivity of their role. Generally, as in the case of Hyundai Motor Company, it is likely that continued employment workers will receive a wage similar to that of a third-year new employee.

- Since wage adjustment is left to labor-management autonomy, what do you think about concerns that there will be a large difference in bargaining power between workplaces with and without unions?

▲Small and medium-sized enterprises (SMEs) are short of manpower, so continued employment will naturally occur. Due to this shortage, SMEs and their employees will likely agree to extend the retirement age as needed. In some sectors, such as securities firms, people have to leave the company much earlier, in their late 40s or early 50s. Currently, the only places where people can work until the retirement age are mostly large manufacturing companies or public institutions with strong unions. Issues like continued employment and retirement age extension are focused on these groups. These companies are not short of manpower and are popular among young people. If the retirement age is uniformly extended, there will be no new hiring of young people, but continued employment is still necessary, so there is a need to strike a balance.

- Does the public interest committee's proposal focus on large companies and public institutions?

▲That's correct. If large companies were short of manpower or there was an income gap, they could simply extend the retirement age. However, they are not short of manpower, and their wage levels are very high. Therefore, if those over 60 are to be continuously employed, both their contribution to the company and their compensation must be carefully considered. There is also a high possibility of generational conflict. This is why it is difficult to hastily extend the retirement age. It is simply not feasible. Our conclusion is that we should not move toward a situation that strengthens vested interests through a uniform extension of the retirement age.