The working years of S. Korean workers will be extended a decade or more by a bipartisan bill passed by a subcommittee of the National Assembly requiring employers to guarantee employment until the age of 60.
The bill seeks to make good on an election pledge by both the ruling Saenuri and the opposition Democratic United Party (DUP). By substantially increasing the working age of the nation’s baby boomers, the new law is likely to change the dynamics of S. Korea’s corporate culture, boost economic security for an aging society, add to employers’ financial burdens and possibly hamper the job searches of recent graduates.
The legislative subcommittee of the National Assembly’s Environment and Labor Committee passed a bill Tuesday to require private and state-run companies to guarantee employment until workers are 60 years old. Currently the recommended retirement age of 60 is widely ignored by the private sector.
Bigger firms with more than 300 workers and state-run enterprises will be required to adopt the new retirement age as of Jan. 1, 2016. Smaller companies and central and local governments will have until Jan. 1, 2017 to make the change.
The law will help remedy an outdated corporate culture in which many workers are put out to pasture at a median age of 48.8, an age at which workers in most western firms are considered to be at the peak of their productivity. In smaller firms the actual median retirement age is 48.2 years. The official retirement age of 55 is so widely disregarded that a large percentage of workers must struggle to survive until their pensions kick in at the age of 60 or 61.
Korea’s current retirement age is an anomaly among industrialized nations in which the age if typically between a low of 60 in France and a high of 65 in Japan and the US. Among OECD nations the average retirement age is about 63.5 years.
The raising of the compulsory retirement age is being criticized by the business community. Under the current practice the average worker with more than 20 years of service earns twice that of a first-year hire, a much bigger disparity than the 130% prevailing among European firms, according to the Korean Business Federation.
The new law was hailed by labor unions who said the move was necessary to address the impact of an aging labor force. The number of workers aged 15 to 64 is expected to peak at 37.04 million in 2016 before going into a rather sharp decline due to one of the world’s lowest birth rates.