It seems evident that the government wants to extend the legal retirement age. In many respects, it is a step in the right direction.
The most convincing indication has come from Hong Nam-ki, deputy prime minister for economy, who said last week that one of the 10 government task force teams working on demographic changes is focused on the retirement age. He predicted the government will be able to announce its position by the end of this month.
Stretching the retirement age, which is now 60, is not a simple matter and it definitely needs social consensus. But what cannot be denied is that it is one of the most effective means to cope with rapid aging of a society like Korea.
Indeed, aging -- which has been further accelerating in recent years in the wake of the retirement of baby boomers born from 1955 to 1963 and the world’s lowest birthrate -- is the toughest demographic challenge for Korea.
A recent government report said that the elderly population -- those 65 years or older -- is set to increase by 480,000 in each of the 10 years from next year. The portion of the senior citizens will exceed 20 percent of the total population in 2025, making the country a super-aged society.
If left unattended, the fast aging population will have a negative impact on the economy and society. One big consequence will be the shrinkage of the working-age population, which refers to those aged between 15-64.
According to Statistics Korea, the working-age population, which is set to drop by 55,000 this year, is estimated to plummet by 232,000 next year, and decrease by an annual average of 325,000 for nine years from 2020-2029. In 2030, as many as 520,000 will be shed from the working-age population.
Such a rapid contraction of the working-age population may well hamper vitality of the economy, hurting jobs, production, consumption and investment.
Keeping more people in their late age in the workforce, therefore, could be an effective option to make up for the shortage of workers.
Already, consensus seems to be building up in favor of extending the retirement age. In a landmark ruling, the Supreme Court raised the maximum working age for physical labor to 65, compared with 60 in the past.
Reflecting such a trend, some industries have already broken the current retirement age, which was set only in 2016. One good example came from the recent labor-management agreement made by some bus companies. A key element of the agreement that averted an impending strike of drivers was to extend their retirement age to 63.
The case of foreign countries could also offer a lesson to us. Japan, which underwent aging before South Korea, is now discussing a proposal to stretch the retirement age from 65 to 70. France and Germany are also working to raise the retirement age from the current 65.
While all these strengthen the ground to make people work longer, extending the legal retirement age is never a simple matter. The government and the society as a whole need a lot of complementary measures and preparations.
Minimizing the negative impact on jobs of young people should be one first step. Hong, the chief economic policymaker, downplayed the effects on the youth job market, noting that about 800,000 people leave the labor market while there are only 400,000 entrants every year.
But it’s too simple an observation. Extension of the retirement age usually causes conflict between the young and old generations. The situation may vary depending on industry and job market, but measures should be taken to minimize the negative effects on jobs of young people.
Other complementary measures should include reform of the wage system, increase job market flexibility by making layoffs easier and reform of the pension and other social welfare systems.
Extension of the retirement age is complicated which requires review and change of a variety of social institutions and systems. But what’s obvious is that it is inevitable and the earlier the government takes action, the better it would be for the nation.