18th Market Economy Colloquium: Labor Supply After Older Workers Leave Their Main Jobs

18th Market Economy Colloquium

Date and Time: 11:00 a.m., October 23, 2026

Venue: Pureun Hall

Topic: Labor Supply After Older Workers Leave Their Main Jobs

Presenter: Taehee Oh, Professor, Department of Economics, Incheon National University

Discussants: Sung-no Choi, President, Center for Free Enterprise (CFE); Yoonseok Jung, Professor, Myongji College; Giman Kim, Secretary General, Good Regulation Citizens Forum; and five others

Labor Supply After Older Workers Leave Their Main Jobs (Summary in Narrative Form)

Taehee Oh, Professor, Department of Economics, Incheon National University

Although Korea has a high labor force participation rate among older people, elderly poverty remains a serious problem. Korea’s elderly poverty rate stands at 39.7%, far above the OECD average of 14.8%, while the labor force participation rate for those aged 65 and older is also high at 39.4%, compared with the OECD average of 14.0%. Many older people continue working after retirement to make a living, but in many cases they move into low-wage jobs without being able to utilize the skills and expertise accumulated in their previous positions. The government operates various senior employment programs, but about 62% of total program volume is concentrated in public-interest activity types, limiting the use of skilled labor. In particular, the average age of retirement from a main job is 52.9, earlier than the statutory retirement age of 60, and this creates an income gap before National Pension benefits begin. Accordingly, the issue of employment for older people needs to be examined not simply through the lens of extending the retirement age, but by focusing on labor market transitions and income changes after leaving a main job.

This presentation aims to empirically analyze the causes of income decline experienced by older workers after they leave their main jobs and to explore the conditions for continued employment that would benefit both workers and firms. To this end, it analyzes job transitions and income changes among second-wave baby boomers (those born between 1964 and 1976) and examines the long-term income losses associated with leaving a main job among first-wave baby boomers and earlier generations. It also reviews firms’ incentives to continue employing older workers and the institutional limitations of extending the retirement age, based on theories of seniority-based wages and firm-specific human capital. The key question is whether the decline in older workers’ income is simply due to aging, or whether it stems from an inability to use previously accumulated skills during the process of job transition.

The first analysis was conducted on 3,296 second-wave baby boomers aged 50 and older using 2021, 2022, and 2024 data from the Korean Longitudinal Study of Older Workers and Employment (KLoEE). The results show that 41.1% had changed jobs at least once after age 50, and 67.9% changed industries immediately after leaving their main job. In this process, average monthly labor income fell by about 21%, from 3.43 million won to 2.71 million won, and remained at around 2.67 million won thereafter, without recovering. In particular, reemployed workers who changed both industry and occupation earned about 22.4% less than workers with average career trajectories, while temporary and daily workers earned about 26.7% less than regular workers. By contrast, additional income decline attributable solely to age itself was generally limited. This suggests that the decline in older workers’ income may be more closely related to constraints on utilizing skills caused by changes in industry and occupation than to simple aging.

The second analysis used 2006–2020 data from the Korean Longitudinal Study of Aging (KLoSA) to estimate long-term income changes following departure from a main job among 884 men born before 1961. To distinguish the effects of aging from the effects of job change, a Heckman two-step fixed-effects model was used, and income changes were analyzed by time elapsed after job transition. The results show that average monthly labor income declined from 3.71 million won at age 50 to 1.39 million won at age 75, with a particularly sharp income cliff appearing in the 57–65 age range. Even six years after leaving a main job, income remained about 41% lower than before the job change, and analysis controlling for age effects also confirmed that income recovery was limited. By contrast, when workers changed jobs other than their main job, the income decline was relatively temporary. The presentation interprets this difference as likely arising from the loss of the human capital and wage advantages accumulated in the main job.

Based on these empirical findings, the presentation reviews firms’ incentives for continued employment. Korea’s seniority-based wage system has a strong deferred-compensation structure: wages are lower than productivity in the early years of tenure and higher than productivity in the later years. Accordingly, if only the retirement age is extended while the wage system remains unchanged, firms’ labor cost burden may increase, potentially inducing early exits through honorary retirement or encouraged resignation. However, firms also have incentives to retain skilled workers. In a 2026 survey by the Korea Employers Federation (KEF), 75.4% of firms cited the use of skills and expertise, and 55.4% cited responses to labor shortages, as reasons for continued employment of older workers. Among firms, 34.2% said wages decline in the rehiring process, and the average wage cut among those firms was 20.6%. This suggests that if wages and job duties are adjusted appropriately, a mutually beneficial outcome is possible in which firms retain skilled workers and workers earn higher income than they would through outside reemployment.

Finally, the presentation points out the limitations of uniformly extending the statutory retirement age from 60 to 65. If only the employment period is extended without accompanying adjustments to wages and job duties, firms’ burden may expand and actual incentives for continued employment may weaken. In addition, the benefits of retirement-age extension may be concentrated among workers in large firms and the public sector, where job security is high, and wage rigidity may also affect new hiring of young workers. By contrast, flexible continued employment can allow firms and workers to adjust wages, duties, and working hours in line with productivity, thereby making use of existing skills and reducing income loss, though safeguards are also needed to prevent exclusion from selective rehiring and disparities in bargaining power. Ultimately, the presentation’s central conclusion is that the debate over extending the retirement age should not stop at simply raising the age limit for employment, but should focus on creating conditions for continued employment that make sustained use of the human capital accumulated by older workers while benefiting both firms and workers.

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Original title: 제18회: 고령자의 주된 일자리 이탈 이후 노동공급

Author: Market Economy Colloquium

Date: 2026-10-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=collo&pn=1&idx=29679