By Cho Jin-seo
The government made it clear Tuesday that it is against state-run firms' moves to extend the retirement age, saying that it will soon introduce detailed guidelines to discourage such measures.
Nine out of 101 state-owned firms have raised their retirement age by an average of 3.3 years by adopting the ``wage peak'' system. The latest addition to the list is KEPCO, the state power company, where the system will be implemented from July.
KEPCO said that its management and labor union have agreed to increase the retirement age to 60 from 58 for people who were born after 1954.
Instead, their salary will ``peak'' when they are 56 years old and then diminish by as much as 50 percent in their last four years of work.
The Ministry of Strategy and Finance is worried that the delayed exit of aged workers will worsen unemployment among young adults, which is already a serious social problem.
Yoon Jeung-hyun, the finance minister, has been one of major skeptics of the program. In a high-level government meeting last month, He said that the wage peak scheme conflicts with government unemployment policies.
His view was reiterated Tuesday, with one high-ranking official saying that the government will not allow state-owned firms to exploit the peak-wage system as a means of giving more years to their employees.
``We are preparing guidelines in order to stop a comprehensive extension of the retirement age,'' the anonymous official was quoted as saying by Yonhap News Agency.
``State-owned firms have provided more stable jobs than private-owned firms, but at the same time their workers tend to be less competitive as they age. What is necessary is to only raise the retirement age for workers who are really needed by the company.''
The report said that the guidelines will be published by April, and the ministry will discourage firms from comprehensively raising their retirement age from now on.
According to the government statistics, the unemployment rate among people in their 20s was 9.3 percent last month, much higher than the national average of 5.3 percent.
In South Korea and Japan, many companies have traditionally paid their workers based on seniority, not on performance. This has made firms reluctant to reemploy retired workers because of their high cost.
The adoption of the wage peak system brought a change to corporate culture here, and helped reduce the government's spending on pensions.
The scheme was introduced during the Asian financial crisis ten years ago, when firms tried to retain experienced employees rather than fire them and save on short-term labor costs.
So far, 27 state-owned firms have adopted the scheme. Among them, 18 firms left the retirement age unchanged at 58, but nine firms used this system to effectively increase the retirement age from 58 to 60.
State companies are favored by many young job seekers as most of them guarantee full-time employment until retirement. The number of employees in these companies remained largely unchanged during the recession, while the recruitment of new workers has been reduced.