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[Editorial] Divisive issue

Generational conflict brewing over whether to extend retirement age

Korea sees potentially acute generational conflict looming over the issue of whether to raise the legal retirement age currently set at 60. On the opposite sides of the emerging fault line are baby boomers, born in the early 1960s, and what is known as the “MZ generation,” referring to millennials and Generation Z, together including people born from the 1980s to 2010s.

A week ago, the trade unions of South Korea’s three major automakers -- Hyundai Motor, Kia Corp. and GM Korea -- petitioned the parliament to revise a law that would extend the retirement age by up to five years to match it to when people are entitled to their national pension. The pension age is set to increase from the current 62 to 63 in 2023, 64 in 2028 and 65 in 2033.

The unions argued that increasing the retirement age would be inevitable in order to cope with a possible labor shortage and would also enable companies to make high-value-added products with skilled labor.

A day later, a petition against a retirement age extension was posted on the online bulletin board of Cheong Wa Dae. The petitioner, who identified himself as an MZ generation employee at one of the three carmakers, insisted that the measure would make it hard for companies to hire more competent workers and exacerbate youth unemployment, which is now hovering around 10 percent. He criticized the unions for attempting to increase the retirement age for baby boomers by indiscriminately portraying them as a skilled workforce, while being negligent in preparing for changes in the car industry.

Public opinion on the issue is divided, with tens of thousands of people siding with either of the conflicting petitions.

Calls for extending the retirement age have also been intensifying among unions of companies in other industrial sectors with a higher ratio of blue-collar workers such as shipbuilding, petrochemicals and steel.

Against this backdrop, Kim Dong-myung, head of the Federation of Korean Trade Unions, one of the nation’s two main umbrella labor organizations, recently pledged to put the issue of a retirement age extension on the agenda for discussions at the Economic, Social and Labor Council, a presidential panel.

Technological advancement has heightened the need for companies to reduce existing production workforce and hire new employees who keep pace with cutting-edge technologies. Many of the MZ generation employees appear to favor management opposing a retirement age extension, which they see as hampering them from receiving due compensation for their performance and leading to a decrease in jobs for young people.

In a broad sense, it may be necessary to raise the retirement age in a gradual manner to cope with a decline in the country’s workforce in the coming decades with a plummeting birthrate coupled with the rapidly aging population.

A prerequisite for increasing the retirement age is a more flexible employment system that makes it easier to hire and lay off workers. It is also necessary to introduce the wage peak system, a scheme that gradually cuts salaries for workers nearing retirement age. Lawmakers shelved the mandated introduction of the scheme when they passed a law in 2013 to increase the retirement age to 60. As of June 2019, just over half of companies with more than 300 employees have implemented the wage peak system.

Unions of major firms that have introduced the scheme have called for its abolishment, while demanding an extension of the retirement age. Corporate competitiveness would weaken considerably if companies are pushed to raise the retirement age without taking measures to make employment conditions more flexible and replace the seniority-based payment system with a performance-based one.

President Moon Jae-in’s administration has on and off floated the idea of raising the retirement age while remaining reluctant to take concrete action. The Ministry of Economy and Finance is said to be considering when and whether to announce a plan for starting public debate on the issue from 2022.

This ambiguous stance seems related to the ruling bloc’s wish to draw support from elderly voters nearing retirement age while minimizing backlash from younger voters in the lead-up to the presidential election set for March and nationwide local polls to be held three months later. But it would only deepen confusion and division over the sensitive matter.

The government and ruling party lawmakers should be earnest in tackling the tough task of setting up preconditions for raising the retirement age.