Moment of truth
The Moon Jae-in administration has come up with a retirement age extension plan aimed at forcing companies to employ workers above the current limit of 60, as in Japan. Individual companies can choose among scrapping the retirement age, extending it or re-employing retired workers. The system is similar to Japan's in the sense that it forces employers to hire workers until a certain limit above 60.
Deputy Prime Minister for the Economy Hong Nam-ki said the government will decide the fate of the new retirement plan in 2022. But the government must take into account its broader repercussions on our society, including the time when subscribers of the national pension begin to receive payments.
Retirement extension has emerged as one of the most urgent issues since our economy lost steam due to the rapid aging of our society. Korea is the country with the lowest birthrate among Organisation for Economic Cooperation and Development members. As a result, the country is expected to become a "super-aged society" by 2025, when people aged 65 and over will account for 20 percent of our entire population. Our population is expected to decline from 2028, while the working population aged between 15 and 64 has been declining since 2018.
Considering such serious demographic shifts, extending the retirement age is the way to go. But the government's announcement has many problems, as exposed in June when it publicized the issue. A typical problem is deepening joblessness in the younger generation. While retirement extension helps people in their 50s and 60s work longer, the young have fewer job opportunities. The government has not explained how to mitigate their pain.
Political analysts believe the government is fishing for votes from people in their 50s in the general election in April. Companies pay more money to older people due to our seniority-based pay system. Without fixing our rigid labor market, companies will suffer.
Another problem is benefits for senior citizens. If the bar is lifted above 65, the time for receiving benefits — such as free subway rides and basic pensions — should be delayed along with a reform of the national pension service. When a government committee proposed to lift the disbursement age to 68, a negative reaction prevailed.
No matter how reluctant the government may be, the moment of truth is nigh. It must prepare for all possible conflicts and discontent before it's too late. The key lies in building a social consensus.
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