Retirees and pensioners
Extending retirement age will reduce social cost
Political parties are to extend the mandatory retirement age. The governing Saenuri Party is leaning toward raising it from the current age of 57 to 60, and ultimately to 65 by 2033. The opposition Democratic United Party is also moving to link corporate incentives to hiking it above 60.
This is encouraging to more than seven million baby boomers, born from 1955 to 1963 as they start to retire from this year. It is, however, likely to trigger a generational clash. Young people in particular will find a tightening of job openings.
The campaign pledges come after the government’s recommendation of hiking the retirement age to 60 last year. The plan will become mandatory in 2017 in line with the deferment of pension age. Now, retirees must wait until 60 for becoming pension beneficiaries. The pension age will progressively rise to 65 later. Matching pension and retirement ages is critical as the average life expectancy is to surpass 80.
Korea is probably only one of a few countries with the retirement age in the late 50s. Workers of other countries can legally work beyond 60. Some countries regard retirement as a choice, not an obligation. Setting the retiring age is unlawful in Australia. In Canada the normal retirement age is 65 although it cannot be forced.
Mandatory retirement in the United States is generally unlawful, except for certain jobs including military personnel and air traffic controllers. U.K. employers cannot give employees notice of retirement. They must objectively justify any compulsory retirement age to avoid age discrimination claims. The retirement age is justified as certain occupations are either too dangerous or require high levels of physical and mental skills. The limit is often arbitrary and is out of line with an actual physical evaluation of individuals, however. The compulsory rule may trigger age discrimination or ageism.
Forcing workers to retire before they receive pensions will increase social costs. Many Koreans often feel tempted by bribery for their post-retirement life. Matching pensions and retirement ages will likely reduce corruption in Korea.
Companies lobby against the legalized extension out of fear of increased labor costs. The government could introduce incentives to companies hiking the severance age. Employees must be ready for reduced pay as long as they can work beyond 57. Unions need to link wage hikes to extending the retirement age.
Many retire even before the mandatory age. Companies must at least guarantee the current retirement age. Older workers have experience and high productivity. Many of them must be ready to work for lower salaries. Before legislation, employers and employees can individually extend the severance age through consent.
Policymakers and legislators face tough questions such as converting non-regular workers that account for one-third of employment into regular ones and extending the retirement age. A key item on the agenda in this year’s elections should be jobs for the young and old.