Early Retirement, Poison to the Aging Society

“Stop people from retiring early!”

The OECD has sent out another warning to industrialized countries that are facing a growing threat from an aging population. This warning can also be applied to Korea, for it is experiencing a rapid aging of its population together with rapid economic growth.

In a recent report entitled “Aging Society and Ballooning Pension Crisis” the OECD warned, “Even though member states are reforming their own pension systems, the crisis can only be overcome by changing our mindset and adopting institutional practices that stop early retirement.”

Every 2 young people will have to support 1 elderly person by 2050

The increase in the number of non-working elderly people will be a burden on the economy.

The OECD predicted that, unless retirement ages are adjusted to a higher level, the current average older person dependency ratio of 22 percent would rise to 46 percent by 2050.

Dependency ratio is a comparison of the population over the age of 65 against the population between the ages of 20 and 64. The result implies that by 2050, every 2 people between the ages of 20 and 64 will have to work in order to support 1 person over 65.

More people over 55 should work

A short-term solution from the OECD is that companies should employ more not-yet-aged people of 55 to 64. An OECD survey showed that the employment rate for this age group was 48 percent on average, but that variations from one country to another were large, with France at 25 percent and Switzerland at 70 percent. For countries with a low employment rate, it was revealed that people retired 2 or 3 years earlier than they should, through methods such as long-term absence and receiving disability pension.

In addition, the OECD urged governments to take the lead in employing elderly people by diminishing employment discrimination, reinforcing re-education and suggesting appropriate work hours and conditions for the aged group.

Koreans have average 18 years after retirement

According to the OECD analysis, Koreans` average retirement age is 67.1, second highest after Japan at 69.1. The analysis revealed this is due to a structural problem within the social welfare system, since a weak social safety net makes it harder for employees to retire early, compared to employees of advanced countries.

However, assuming that the three major causes of death, including cancer, can be prevented in the future, the average life expectancy is expected to increase to anywhere from 85 to 87, meaning that people would be off work for almost 20 years after retirement.

According to the Statistics Bureau, Korea has already become an aging society with people over 65 accounting for 7 percent of the population, and is expected to become an officially aged society by 2019, when the percentage rises to 14 percent. This is why experts are pointing out that the long-term growth engine for the Korean economy depends a great deal on utilizing the aged manpower.

Rae-Jeong Park ecopark@donga.com