Businesses, both small and large, voiced opposition to a parliamentary subcommittee’s decision to gradually extend the legal retirement age to 60 from 2016, saying the extension would overburden them under the current seniority-based wage system and only cause conflict with the younger generation over jobs.

The Korea Employers Federation, the Korean Chamber of Commerce and Industry, the Federation of Korean Industries and the Korea Federation of Small and Medium Business (Kbiz) are all against the revised bill.

“If the revised bill is passed, it will aggravate the personnel management problems of small and medium-sized firms which are already suffering from a shortage of manpower and rising wages due to high turnovers of young workers,” Kbiz said in a statement on Tuesday, urging the National Assembly’s Labor and Environment Committee to withdraw the bill.

“(The parties’) handling of the revised bill turns a blind eye to the deregulatory efforts of the new administration and the National Assembly to help ease the burden on SMEs, and will only degrade the competitiveness of SMEs by creating new regulations.”

Kbiz argued that Korea should move toward creating demand for employment of aged workers by making the job market more flexible and expanding the wage peak system instead of making them work in the same company for long.

According to the KEF and KCCI, the average wage of an employee who worked over 20 years at a local firm is more than double the average pay for an entry-level worker with less than a year’s experience.

In many European countries, the ratio ranges between 120 percent and 130 percent.

The productivity of senior employees in Korea, however, does not match their wage levels.

The productivity of workers aged 55 or older amounts to only about 60 percent of that of employees aged 34 or younger, according to the Korea Labor Institute.

“If the retirement age is pushed back without adjusting the wage system, the gap between an aged worker’s productivity and wage will only worsen,” said a KCCI official.

Only 23.3 percent, or 439, of the country’s 1,881 workplaces with over 300 workers have set retirement ages at 60 or higher.

Hyundai Heavy Industries, Homeplus, GS Caltex and Daewoo Shipbuilding and Marine Engineering have pushed back their retirement age to 60.

Most companies are not ready to guarantee employment until their workers turn 60.

“When Japan set the mandatory retirement age at 60 in 1998, it was already implemented in 93 percent of the companies. Korean businesses, in contrast, are mostly not ready,” said a KEF official.

A congestion of senior workers would also increase the burden on personnel management.

Companies are supposed to hire between 3 and 4 percent of their total staff as new recruits each year and let go of senior workers to maintain a virtuous cycle of business knowhow and technologies. An extended retirement age, however, could rupture the circulation of workforce as it is likely to reduce the demand for new recruits, business groups argue.

In a survey conducted by the KEF in May last year, 54.5 percent of the companies expected the size of their recruitment to shrink if the retirement age is pushed back.

“It is not desirable to force retirement age extension when there is no solution to the high rate of youth unemployment,” said an FKI official.

“(The government) should let companies decide for themselves or delay the implementation (of the law).”

By Kim So-hyun (sophie@heraldcorp.com)