Raising the Retirement Age

The first wave of post-Korean War baby boomers, or those born in 1955, hit age 55 this year. Despite undergoing exam hell, they still had to struggle to survive the ever-competitive Korean society. Though they must work more to help their children attend college, get jobs and marry, the baby boomers will soon retire. Some could even be pushed out before the official retirement age. Many people in their 70s and 80s remain physically active thanks to medical advances and higher life expectancy. The baby boomers are still too young to retire before age 60.

For companies, they want to continue utilizing the baby boomers’ work experience and skills but high salaries are forcing them to push these employees out. In France, the government implemented a plan to lower the pension age and raise the retirement age from 60 to 62 despite strong opposition from unions. Korean workers have every reason to envy the French since many Koreans are forced to retire at age 55.

Korean steel giant POSCO will raise the retirement age for workers from ages 56 to 58 by adopting a wage peak system. Under the plan, pay will be frozen for workers from ages 52 to 56, cut 10 percent at age 57 based on the wage received at age 56, and reduced another 10 percent at age 58 on pay received at age 57. The wage peak system enables companies to employ experienced workers without additional personnel costs, creating room to hire new staff. Employees can also enjoy stable employment and income. Among the country’s 8,399 companies with more than 100 employees, 937 (11.2 percent) have introduced this system.

Expenses for children’s education take up a large part of household spending in Korea. Many in their mid-50s or older want to keep working even if they earn just half of their salaries in peak years. The wage peak system is beneficial for the economy since it simultaneously reduces the economically active population and social costs for the elderly. By 2040, those over age 65 are expected to number more than half of the Korean population between the ages of 15-64. Allowing senior citizens to work and support themselves is desirable. Younger people, however, might not welcome raising the retirement age given high youth unemployment.

Editorial Writer Lee Jin-nyong (jinnyong@donga.com)