KOREA: Support for Extending Retirement Age to 60, Then to 65

SEOUL (The Korea Herald), June 4, 2006: It is welcome, says an editorial in the Korea Herald today, that the government is moving to extend the retirement age in the private sector and prohibit workplace discrimination based on age. There should be some complementary measures, but the rapid aging of Korean society, among other things, offers a good reason to support the proposal. The government proposal calls for raising the retirement age to 60 by 2010, from the current 55 to 57 in most workplaces. It will be further extended to 65 by 2033. Though late in coming, it is good to see the government trying to catch up with the global trend. Japan has already extended its retirement age to 62 and plans to stretch it to 65 by 2013. What's encouraging is that officials seem to understand that simply imposing such a government guideline would not work, says the editorial comment. They said the government will come up with support measures, such as an expansion of the merit-based pay system and the "salary peak system." The latter provides aged workers with an opportunity to work past their retirement age for a salary less than their peak salary. If one takes a close look at the rapid aging of Korean society and its impact on its demographic and economic realities, allowing more people to continue economic activity into their later years is an urgent task. In 2004, the number of those aged 65 or older stood at 4.36 million, 9.3 percent of the total population. The nation's birthrate has dropped to 1.08, the lowest in the world, and life expectancy, which now stands at 77, keeps increasing. Korea is headed toward an aged society, and at a very rapid pace. That means there will be less people in the workforce and more elderly to support through welfare programs. It doubtless will further strain the nation's already-depleting pension system and put a considerable burden on its welfare budget. The early retirement of workers in their 40s and 50s, quite common in Korea since the 1997-98 foreign exchange crisis, is adding to the problem. Extending the retirement age does not solve every problem. Rather, it can cause problems such as the worsening of youth unemployment and a decline in worker productivity. This is the reason why there should be concerted efforts to support the policy. The biggest challenge is how to reduce the burden of labor costs on employers. The seniority-based pay system that is still dominant in the Korean corporate sector needs to be shifted to a merit-based one. Labor unions, many of which still oppose performance-based pay and a salary peak system, must accommodate the changes. That would benefit them too in the long run, comments the newspaper. Copyright 2001 ~ 2005 Herald Media INC. All rights reserved.