[Op-Ed] Extending the Retirement Age to 65—Undermining Business Autonomy and Excluding Youth, Benefiting Only a Few

Benefits only men, the highly educated, regular workers, employees of public and government institutions, large corporations, and unionized workplaces

A law for the sacrifice of the many and the benefit of the few, leaving less productive older workers in place

It is obvious that this will hinder the growth of Korean companies and negatively affect the growth of the country as a whole

The government’s role is to guarantee freedom for businesses and help young people find employment

The bill to “extend the retirement age to 65” is controversial. Both the ruling and opposition parties have spoken with one voice, saying that extending the retirement age would be an effective response to the acceleration of an aging society caused by low birthrates. But the bill excludes corporate autonomy and young people.

The responsibility and obligation to address elderly poverty and youth unemployment lie not with businesses but with the state. More urgent than extending the retirement age is ensuring a high employment rate for young people, who are now part of the working-age population and are facing severe difficulty finding jobs. Extending the retirement age without social consensus is highly likely to inflame intergenerational conflict and create a balloon effect in which the retirement of the privileged is guaranteed at the expense of jobs for young people. If we fail to examine the root causes and insist only on extending the retirement age as a stopgap measure, it is clear that even greater side effects will follow.

Extending the retirement age, together with the seniority-based wage system, has the side effect of causing inefficiency in the labor market. The seniority-based wage system is an outdated salary structure that ignores the reality of the human body, whose productivity declines over time. The Federation of Korean Industries estimated that extending the retirement age to 65 would cost 15.8626 trillion won based on 2019 figures. This would naturally become an additional cost passed on to businesses. In other words, retirement-age extension means worker productivity declines while the costs companies must bear increase.

This year, the employment rate for older people aged 60 and over reached a record high of 22.4%. This is partly due to aging, but it also means that rather than extending the retirement age unconditionally, if labor demand and supply are matched autonomously, older people over 60 can continue working through continued employment.

Hyundai Motor allows production workers to continue working for up to two more years after retirement at the starting salary of a new employee. Japan has left it up to companies to choose their retirement age autonomously. It is worth considering whether it is right for the government, a third party, to intervene in matters that should be left to the autonomy of businesses and the market, thereby imposing burdens on individuals and firms.

Who stands to benefit from retirement-age extension, such that this bill is being pushed through? They are senior executives at large corporations and civil servants. They belong to the privileged class in our society. Retirement-age extension is nothing less than consolidating the status of the privileged at the expense of the younger generation.

For example, there has been much criticism that the mandatory retirement age of 60, legislated in 2016, worked only in favor of large companies with unions, and especially of regular workers within them. In addition, a number of academic papers have shown that extending employment for older workers aged 56 to 60 reduced jobs for young people aged 20 to 27.

Even within the privileged class, stratification and gender bias create disparities within groups, so the benefits of extending the retirement age accrue only to a small privileged minority. Even if retirement-age extension is legislated, the number of people who would actually receive policy benefits among the baby boomer generation, the first to benefit, would be very small.

The probability of continued employment was higher for men, the highly educated, regular workers, employees of public and government institutions, those working at large corporations, and those employed at unionized workplaces. This means the benefits of retirement-age extension are concentrated on specific groups with stable employment. Retirement-age extension is merely a law for the sacrifice of the many and the benefit of the few, and it is questionable whether it would increase the welfare of society as a whole.

If the bill to “extend the retirement age to 65” passes, youth employment will not rise, and older workers with declining productivity will remain in companies. It is plainly obvious that this will hinder the growth of Korean companies and negatively affect the growth of the country as a whole.

By provoking conflict between social groups and failing to reach social consensus, it will generate major social turmoil whose costs cannot be calculated in accounting terms. We must recognize that South Korea is currently facing the critical crises of low birthrates and aging. This is the time to consider fundamental, long-term solutions that benefit the many and increase the welfare of society as a whole.

The “retirement age 65” bill is an irrational piece of legislation that favors only certain small groups while ignoring the freedom of contract in employment relationships between employers and businesses. It is not only incapable of resolving the social problems identified by both ruling and opposition parties, but is merely a stopgap response that will produce numerous side effects.

Businesses have the autonomy to hire workers freely in the labor market with the goal of improving productivity. Under corporate autonomy, older people who wish to work and young people seeking jobs can coexist and prosper together. The government’s role is to guarantee freedom for businesses and help young people find employment.

Yujin Jung, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 기업의 자율성과 청년 배제된 '65세 정년연장', 소수에 혜택 돌아가

Author: Yu-jin Jeong

Date: 2025-01-02

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=27243