The retirement age is quickly becoming a big issue in our society. In July, the Hyundai Motor Co. union demanded to extend the retirement age from the current 60 to 64 in the labor negotiations. This labor union’s demand brought big power to our society. In Korea, as the ‘Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion’ has been revised, the retirement age, which was just a recommendation, became a mandatory clause and was extended to 60. Since then, huge arguments have arisen in the process of extending the age to 60, the labor union’s demand making the age even four years higher was extremely shocking. In fact, as the low birth rate and the aging phenomenon are accelerating in Korea’s modern society, discussions on extending the retirement age have continued consistently. However, the social stance on extending the retirement age is still becoming a tense confrontation. While there are some opinions that the extension of the retirement age will alleviate various problems caused by low birth rate and an aging society, there are opinions that it will cause conflicts between generations and reduce the productivity and competitiveness of the company. Let's take a closer look at both sides' standpoints.
As the low birth rate and aging phenomenon in our society are accelerating, demands for an extension of the retirement age continue to rise. Following the revision of the law that extended the retirement age to 60 in 2013, there are voices calling for a further extension of the retirement age to about 65. Professor Lee John of Hankuk University of Foreign Studies Law School said, “Considering the decrease in the production and the rapid increase of the elderly due to the low birth rate and aging that our society is facing, extending employment or retirement age in the future seems to be an inevitable choice.” The extension of the retirement age has been pointed out as a solution to the problem of labor shortage, increasing welfare burden, and worsening welfare problems caused by low birth rate and aging population. Furthermore, the extension of the retirement age is an inevitable path for South Korea, which is about to become a super-aged society. Considering the positive effects of extending the retirement age in a changing society, the government should push ahead for it.
First, the extension of the retirement age can secure labor. According to Statistics Korea, South Korea will become a “super-aged society” in 2026, which means a society the population of those aged 65 or older accounts for more than 20 percent of the total population. In addition, South Korea is recording the lowest birth rate among OECD countries. In 2020, the birth rate fell to 0.84, the lowest ever. This means that there will be a shortage of new labor to fill the vacancies caused by those retiring. Eventually, a labor shortage problem can occur due to the low birth rate and aging population. In fact, Lee Sang-yi, co-chairman of the Welfare State Society, said, “With the rapid decrease in population of production age, we should make the best use of the elderly’s labor in the future to make our economy sustainable. […] We should introduce an active employment security system that guarantees jobs to at least 65 years old for the elderly who want to work. In addition, various welfare funds can be saved by extending the retirement age, and they can be used in the recruitment of young people to secure insufficient labor. Since 2019, Southeast Asian countries have pushed for an extension of the retirement age to solve their labor shortage problems. Particularly, a senior official of Vietnam's Ministry of Labor and Veterans Affairs said, "The extension of the retirement age is an urgent task to prevent labor shortages." As South Korea is expected to face labor force reduction issues, it will be necessary to extend the retirement age as a quick response.
Second, the welfare burden can be reduced by extending the retirement age. Currently, Korea is implementing welfare systems such as the national pension system, which pays a certain amount of money to ensure basic living when income activities are suspended due to old age, disability, etc. Therefore, if the elderly population grows, the number of welfare recipients increases. As mentioned earlier, Korea, which is expected to become a super-aged society by 2026, is concerned that the number of welfare recipients will sharply increase. In addition, as the record low birth rate continues to decrease, the population that pays income tax to be welfare system also decreases. Therefore, the number of people who will receive welfare benefits is increasing while the number of people who will bear welfare costs decreases. This could take a heavy toll on pension finances. In fact, Lee Ju-yeol, the governor of Bank of Korea, said, “Korea is expected to meet a more rapid increase in mandatory spending due to the festinate aging and low birth rate than any other country in the world. This is clearly a significant challenge for future financial management." However, if the retirement age is extended, the timing of receiving the national pension could be delayed as more elderly people work. This can also delay the timing of the pension fund depletion. Welfare spending will be reduced, and this could soon be the way to secure the financial stability of pensions. Extending the retirement age will also alleviate the problem of welfare finance shortage, as more earned income taxes can be obtained.
Third, extending the retirement age can contribute to the stability of the lives of older workers. The current system that sets the legal retirement age at 60 clearly has limitations. The main reason is the upward adjustment of the national pension receipt age. As technology advanced, medicine also developed, and life expectancy increased. Naturally, the number of national pension recipients increased, and financial stability problems arose. Eventually, the pension receipt age was decided to be raised to 65 from 2013 to 2033 through the first pension reform in 1998. Thus, the pension receipt age will be extended in 2033 through the phased adjustment process, and this creates an economic gap between retirement and pension receipt age for retirees. A so-called "income crevasse" is being created. "Crevasse Fear," a term that means fear caused by economic cliffs during an "income crevasse" period, also appeared. Meanwhile, according to the Hana Financial Group's 100-Year Happiness Research Center in May 2020, 66 percent of retirees aged 50 to 64 in the city said they lacked retirement funds. In fact, Korea is ranked first in the poverty rate for senior citizens aged 65 or older among OECD countries. The legal retirement age of 60 is far short in Korea, where rapid aging is progressing in the situation of an income crevasse, lack of retirement funds, and the top poverty ratio of the elderly. We should supplement the legal retirement age system by extending the age to 65.
Clearly, the extension of the retirement age should be discussed in the low birthrate and aging society, Korea. By extending the retirement age, the government can obtain a workforce and establish fiscal stability by reducing the burden of welfare. Moreover, Korea is about to become a super-aged society. As it is recording the lowest birth rate and the highest poverty ratio of the elderly among OECD countries, extending the retirement age is needed. Some may argue that extending the retirement age will worsen the employment difficulties of young people. But in fact, there are differences in major jobs between young and elderly people, so it is hard to say that they are directly in competitive relations. In Japan, which has already become a super-aged society, the retirement age was extended to 65 in 2013, and from April 2021, the elderly population to age 70 has been also allowed to work. Korea should also lead society in a better direction by referring to these Japanese policies. The extension of the retirement age that can solve and alleviate various problems that may arise due to the low birth rate and aging should be promoted.