Solutions for the 'Continued Employment' of Older People

[Hankook Ilbo · Opening the Morning · February 1, 2024]

Yun Suk-myung, Research Fellow Emeritus at the Korea Institute for Health and Social Affairs (KIHASA) and former President of the Korean Pension Association

Public pensions, especially the National Pension, which are representative means of old-age income security, cannot be received until age 63. From 2028, the eligibility age will be 64, and from 2033, it will be 65. As the majority of workers are exposed to a gap in old-age income, voices calling for raising the retirement age to 65 are growing.

There is difficulty in solving the problem in that raising the retirement age is not as simple as one might think. This is because, besides the seniority-based wage system—the biggest obstacle—Korea is the country where the dual structure of the labor market is most severe. This is due to the large differences in income, social security, and various welfare benefits between the group that has entered the internal labor market and the group that remains in the external labor market. It is also a point where competition for good jobs between older people and the younger generation, who are facing an employment ice age, must be considered.

Despite the implementation of the law in 2016 that mandated a retirement age of 60, only 22% of all workplaces operate a mandatory retirement age of 60 or above, and the rate at which companies with fewer than 300 employees operate a mandatory retirement age system is only one-fourth that of companies with 300 or more employees. The average length of service for middle-aged and older people is only 8.1 years, half of the Organisation for Economic Co-operation and Development (OECD) average (15.0 years). After retiring from their primary job, it is difficult to be re-employed in their existing profession, so many move to occupations unrelated to their primary career (different-type employment or simple labor). A vicious cycle continues where middle-aged and older people who have retired from their primary jobs are re-employed in low-wage positions.

In Japan, where aging is more advanced than in Korea, the retirement age is still 60. Instead, through the 'mandatory employment security measure' until age 65 and the 'effort obligation for employment security' until age 70, 80% of the older population works until age 65 in the form of 'continued employment.' Even though the retirement age is 60 and the eligibility age for pensions is 65, it is a structure where there is no gap in old-age income through 'continued employment.'

Since last summer, the 'Continued Employment Research Group for a Super-Aged Society' of the Economic, Social and Labor Council (hereinafter, ESC), under the presidential office, has been discussing this issue while referring to the employment policies for older people in Japan, Singapore, and other countries. Coincidentally, a meeting of representatives from the Korea Enterprises Federation, the Federation of Korean Trade Unions, and others was held to activate the 'ESC.' The possibility that the issues of continued employment for older workers and raising the retirement age will be selected as discussion topics for the 'ESC' has increased. Recalling that benefits were concentrated on a specific group when the retirement age was raised from 55 to 60, it is necessary to prepare solutions that can benefit the majority of members of society.

During a visit to the presidential office in November 2018, Angel Gurria, Secretary-General of the OECD, delivered several books published by the OECD to President Moon Jae-in. One of them was "Working Better with Age: Korea." This book contains the following content: "Among OECD member countries, older people in Korea work the longest. This phenomenon in Korea is a treasure that other member countries should learn from. (...) The problem is that despite working for a long time, they are unable to work in proper jobs, so while their bodies are exhausted, the wage levels are low, causing elderly poverty." Contrary to the common notion in our society that older people are driven to jobs because welfare systems are not well-organized, it pointed out that while old-age labor itself is positive, the problem is that they are not compensated through proper jobs.

Only the high elderly poverty rate, which is among the highest among OECD member countries, and the low social security expenditure are mentioned, while there is silence regarding the direction of sustainable reform for our society, which is rapidly entering a super-aged society as the birth rate plummets. Rather, there are even movements that attempt to go against the trend of the times. This is because, despite the era of 100-year lifespans being just around the corner, there are many arguments for further raising the income replacement rate of the National Pension, while projecting that the average contribution period of the National Pension will be only 27 years even 50 years from now.

The reason such arguments arise lies in the backward labor market environment. Although the eligibility age for the National Pension is 63, the mandatory contribution age (where the employer bears half of the contributions) is fixed at 59. If the mandatory contribution age is extended to 64 through continued employment, the contribution period could increase by five years. If the retirement age is kept at 60 as in Japan, while the mandatory employment security measure until age 65 and the effort obligation for employment security until age 70 are established, the mandatory contribution age of the National Pension could be extended by another 10 years.

Allowing people to work longer to increase their contribution period and receive more pension is, in a true sense, the strengthening of public pensions and simultaneously the path for generations to coexist. This is why we must hurry to prepare solutions so that continued employment for middle-aged and older workers can become commonplace through proper discussions within the Economic, Social and Labor Council.

Source: Hankook Ilbo (original article)