Korea's employment dilemma: Can older, younger workers really share job market?
Job seekers crowd a fair for older workers in Seoul's Mapo District, Dec. 13, 2023. Yonhap
Experts call for more flexible employment policies as retirement age increase raises concerns over youth hiring
Korea’s labor market is caught in a generational dilemma. Young people continue to struggle to land their first jobs, while older workers are hoping to stay on the payroll for longer, as pension income often falls short of what they need for retirement.
As the country rapidly ages, policymakers are pursuing a gradual increase in the statutory retirement age from 60 to 65. This prospect has raised a difficult question: Are older workers staying in the workforce at the expense of the younger generation’s first break?
A recent survey by the Economic, Social and Labor Council, a presidential advisory body, found that 77 percent of 878 respondents believed Korea needed an employment system that could better accommodate both older and younger workers.
But there is little consensus yet on what that would look like in practice. How can the country make room for two generations to coexist when their needs are increasingly colliding in the job market?
Job market pulling in opposite directions
The number of employed people aged 55 to 79 reached 10.13 million in May, surpassing 10 million for the first time since the annual survey began in 2005, according to the Ministry of Data and Statistics.
Among them is Kim Ki-doo. The 71-year-old works mornings at a dental laboratory, delivering products for three to four hours a day, six days a week.
“Financially, it’s been hard to have a secure retirement. And since my wife is still working, I’m in a position where I have to keep doing something too,” he said.
Yet Kim does not describe his job simply as a financial necessity, adding that he takes pride in being able to adapt to whatever task is assigned to him rather than sitting idle.
For people like Kim, inadequate pension income is one of the major reasons they remain in the workforce. The average monthly pension benefit over the past year was 880,000 won ($654), well below the estimated 1.54 million won needed to cover basic living expenses for a single-person household.
That continued attachment to work is reflected in employment insurance data. In August, the number of workers aged 60 and older covered by insurance rose by about 207,000 from a year earlier, accounting for nearly 75 percent of the total increase, according to the Ministry of Employment and Labor.
At the other end of the age spectrum, however, the picture was almost exactly the reverse. The number of workers aged 29 and younger fell by 56,000, extending a decline that has now lasted 48 consecutive months.
In fact, they were the only age group in the data to see a decline, with employment decreasing across a broad range of industries, including service, manufacturing, information and communications, health and social welfare.
That widening gap is fueling concern that raising the retirement age could make it even harder for young people to get onto the already precarious career ladder.
Son Ga-hyun, 27, who recently found a job after two years of job hunting and part-time work, said keeping older workers longer could inevitably narrow opportunities for younger hires. The two groups may not be competing for the same jobs, but employers still have to weigh labor costs.
“Companies are trying to achieve the highest efficiency with the fewest people possible,” Son said. “Even if employers cut older workers’ pay to make room for new hires, there would be limits to how much they could save — particularly as more young people struggle to find work and rely on their parents, while older workers continue to shoulder family expenses.”
Faced with the cost of hiring inexperienced graduates or bringing in experienced workers at higher salaries, employers may ultimately find it more economical to keep their existing workforce in place, she argued.
The Bank of Korea (BOK) found that from 2016, when the statutory retirement age was raised to 60, through 2024, an increase of one older worker was associated with a decline of 0.4 to 1.5 younger counterparts. This effect was more pronounced at unionized companies and large corporations.
“Simply extending the retirement age while leaving seniority-based pay systems and rigid employment practices intact could lead to unintended side effects, such as a contraction in youth employment,” the central bank said in a report.
One alternative raised by the BOK is a “rehiring after retirement” system, already adopted by countries like Japan, which became a super-aged society earlier than Korea.
Under the system, workers formally retire at the statutory age and then return under a new employment contract. The bank argued that greater flexibility in setting wages could give companies a stronger incentive to retain both experienced workers and young hires.
Experts likewise stressed the need for more flexible employment policies. “Seniority-based pay and employment protections may be seen as fair and necessary by incumbent workers in permanent positions, but extending the retirement age without changing those structures could leave young people waiting even longer to enter the labor market,” said Kim Duk-ho, a professor with Sungkyunkwan University’s RISE project and a former standing member of the Economic, Social and Labor Council.
He added that, difficult as it may be, retirement age reform should go hand in hand with changes to the wage system, more flexible employment arrangements and support for career transitions, as well as pension reform.
The labor ministry plans to submit legislation later this year to gradually raise the statutory retirement age, while simultaneously pursuing measures aimed at increasing youth hiring.
Labor Minister Kim Young-hoon said the trade-off was particularly acute at large companies and in the public sector, where jobs are highly sought after by young people. Those positions account for about 20 percent of the total, he said.
“At least for these coveted jobs, we need to reach a grand bargain that allows both generations to benefit,” he noted.