[Reporter’s Notebook] Retirement Age Extension and the Dual Labor Market Structure

"When it comes to labor, the most significant issues are the dual structure of the labor market and wage disparities."

This was stated by Lee Hanju, Chairperson of the National Policy Planning Committee, during the Ministry of Employment and Labor's policy briefing held at the Government Sejong Convention Center on June 19. Chairperson Lee pointed out that the division of Korea's labor market into the primary sector (large corporations, regular employment) and the secondary sector (small and medium-sized enterprises, non-regular employment) is widening wage gaps.

It is encouraging to hear the issue of the dual labor market structure mentioned by the official responsible for developing the new administration's national policy agenda. This is because many of the labor market's overall problems?such as youth unemployment caused by the limited number of regular positions at large corporations, and early retirement among middle-aged and older workers due to a rigid regular employment structure?stem from this dual structure.

In fact, during nearly a year of covering the Ministry of Employment and Labor, government officials and labor experts I spoke with consistently identified the dual labor market structure as a key cause of various problems throughout Korean society. Although this is a long-standing issue, "it is a problem so daunting that no one knows where or how to begin addressing it," making it difficult to devise clear solutions. In this context, it is certainly welcome that the new administration is not turning a blind eye to the issue.

However, while acknowledging the need to resolve the dual labor market structure, pushing for a mandatory extension of the retirement age without careful consideration may be inconsistent. As the government and the ruling party are reportedly considering introducing a retirement age extension bill within the year, simply raising the retirement age without reforming the wage system, as demanded by labor unions, could actually worsen the dual structure of the labor market.

If the statutory retirement age is raised from 60 to 65, the real impact will be felt in a small number of high-quality regular jobs at large corporations and public institutions with labor unions. These positions are typically seniority-based, with wages increasing according to years of service. If high wages are extended through a higher retirement age, the gap between these workplaces and small and medium-sized enterprises will inevitably widen. Furthermore, companies may reduce new hiring due to increased wage burdens, which could worsen youth unemployment. This is why not only business associations but also organizations such as the Bank of Korea and the Korea Development Institute (KDI) have expressed similar concerns.

The solution is to proceed with careful deliberation. Rather than trying to swallow the large issue of retirement age extension all at once, it is necessary to break it down and address it thoroughly. The National Policy Planning Committee announced that it discussed ways to promote social consensus on retirement age extension during the Ministry of Employment and Labor's policy briefing. To ensure that the idea of 'social consensus' does not remain a mere declaration, efforts must be made to minimize the side effects of extending the retirement age and to develop policies that are well integrated into the realities of the workplace through sufficient deliberation.