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(EDITORIAL from Korea Times on June 4)

All News 07:14 June 04, 2019

Retirement age extension
Consensus needed to tackle rapid demographic change

Economy and Finance Minister Hong Nam-ki has touched off a debate on the need to extend the legal retirement age of 65. The debate is part of the government's efforts to work out measures to cope with the rapid demographic change taking place in Korea.

Appearing on a talk show program of state-run KBS TV, Sunday, Hong said the time had come to discuss extending the retirement age. He added policymakers were actively discussing the matter after forming a taskforce to tackle the country's demographic transformation.

As the minister pointed out, it is timely and appropriate for the nation to consider letting people work longer than the current retirement age. There are many reasons to do so. First of all, the country will find it difficult, though not impossible, to keep sustainable economic growth due to the extremely low birthrate and the fast aging population.

Statistics Korea predicts the economically active population aged between 15 and 64 will decrease by an annual average of 325,000 from next year until 2029. This decline will be exacerbated by the retirement of baby boomers as well as a drop in the number of younger people entering the job market.

The problem will become worse and worse because South Korea recorded the lowest birthrate of 0.98 among OECD member states. The government has spent 150 trillion won ($126 billion) on various programs to boost the rate over the past 13 years, but has failed to make any progress due to deteriorating socioeconomic problems, including scarcer job opportunities, rising education spending for children and soaring rents.

The rapidly aging population is also having other negative implications. The country became an "aging society" with those aged 65 and older hitting 7 percent of the population in 2000. Then it emerged as an "aged society" in 2017 when the percentage of the elderly reached 14 percent. In 2025, the percentage is expected to surpass 20 percent, labeling the country as a "super-aged society."

This transformation is unprecedented. Therefore Asia's fourth-largest economy has to meet greater challenges arising from the tumbling birthrate and soaring number of senior citizens. This explains why the country should hammer out comprehensive and fundamental measures to solve the demographic change before it is too late.

No doubt the falling number of the economically active population will cause a drop in the workforce, undermining the dynamics of the economy. If it fails to reverse the low birthrate trend, the country will have no other option but to accept more migrant workers or utilize the currently underemployed female labor force.

Against this backdrop, the extension of the legal retirement age could be a viable option to make up for the anticipated decline in the workforce. What is important is to build a social consensus on how to extend the retirement age, because the younger generation might oppose it for fear of a higher unemployment rate.

For their part, businesses are likely to be against hiking the legal retirement age, believing that they will be forced to shoulder more labor costs. So the success will depend on how to narrow the differences on the issue among different economic players.

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