Korea seeks balanced approach to older worker employment

As discussions in the National Assembly on extending the retirement age to 65 gain momentum, mid-sized business groups say post-retirement reemployment provides a practical solution to reduce corporate burdens while ensuring job stability for older workers. A survey by the Korea Federation of Medium-Sized Enterprises of 169 companies found that 62.1 percent of respondents preferred reemployment after retirement to retain older employees. Meanwhile, 33.1 percent favored extending the retirement age, and 4.7 percent supported abolishing it.

Among mid-sized companies, 52.6 percent already continue employing workers who have passed the statutory retirement age, and 69.6 percent of these use post-retirement reemployment. Wages for reemployed workers are typically 80 to 90 percent of their pre-retirement level. Companies that retain older employees to leverage their expertise and experience say legally mandating retirement age extensions could be burdensome. They cited concerns over higher labor costs, reduced capacity for new hires, and personnel bottlenecks.

Providing stable jobs for older employees is crucial to addressing skilled labor shortages and income gaps before pension benefits begin. However, a blanket legal extension of the retirement age could create significant challenges. Extending retirement without reforming seniority-based pay and rigid employment structures would substantially increase corporate labor costs. The Federation of Korean Industries estimates that raising the retirement age to 65 without wage reductions could cost companies about 30.2 trillion won ($22.5 billion) annually to maintain employment.

Rising labor costs could also reduce new hiring, worsening already difficult job prospects for young people. The Bank of Korea found that after the 2016 extension of the retirement age to 60, each additional older worker led to a reduction of 0.4 to 1.5 young workers, with the effect most pronounced in large companies. Experts warn that the benefits of retirement age extensions are concentrated in unionized large companies and public sector positions with strong job protections, further deepening labor market duality.

Although extending employment is necessary, a phased approach is recommended to minimize negative effects. Japan offers a useful example. Its law on measures to secure employment for older workers gradually raised the applicable age to 65 over 12 years, with labor-management agreements at each step. Companies could choose among extending the retirement age, abolishing it, or implementing post-retirement reemployment. This approach retained skilled personnel while controlling labor costs and preserving opportunities for young workers. South Korea should similarly prioritize public deliberation and careful policy design rather than rushing legislation.