[Retirement Age Extension, Legislative Review] 65 or Continued Employment... National Assembly and Labor-Management Split Over Extension Method

Japan Mandates Continued Employment System
Significant Differences in Working Conditions and Corporate Burden

Editor's NoteThe Korean labor market stands at a major turning point due to sweeping demographic shifts. Since the introduction of the mandatory retirement age of 60 in 2016, Korean society has entered a super-aged era, and the age of eligibility for the national pension has been delayed. However, the statutory retirement age still remains at 60. New challenges have emerged, including the income gap between retirement and pension, the exit of older adults from the labor market, and corporate workforce management concerns. The Asia Business Daily, through a four-part series, examines developments in political circles regarding raising the retirement age to 65 and explores directions for a new consensus required in a super-aged society.

There is strong disagreement between political circles and both labor and management over whether to extend the current retirement age from 60 to 65, or to maintain the retirement age but introduce a continued employment system that would allow for work beyond the age limit for a set period.

While both extending the retirement age and a continued employment system serve to prolong employment opportunities for older adults, they differ greatly in their legal characteristics, working conditions, and the burden on companies. Legally extending the retirement age means raising the statutory age limit itself while maintaining existing working conditions. In contrast, the continued employment system guarantees employment for a specific period even after retirement, through measures such as reemployment or extending contracts, with the possibility of adjusting remuneration and job duties. In Japan, companies are required to offer continued employment opportunities up to age 65, but in many cases, employees are reemployed under reduced wage conditions.

The Democratic Party is focusing on a phased extension of the statutory retirement age to 65. Their argument is that as the national pension eligibility age is gradually pushed back, the statutory retirement age remaining at 60 results in an income gap between retirement and receiving pension payments, making it necessary to extend the retirement age itself.

Park Hongbae, a Democratic Party assemblyman, who sponsored the retirement age extension bill in the 22nd National Assembly, said in an interview with The Asia Business Daily, "Even if the bill passes, it will require a period of preparation and labor-management consultations at the industry and workplace levels." He continued, "The income gap between retirement and pension is only widening, and it is an issue that can no longer be postponed." He added, "In Korea's labor market, employers have strong authority in setting working conditions, so even if the same system is adopted, there is a higher risk of working conditions worsening compared to Japan. Extending the statutory retirement age is better aligned with employment stability than continued employment, which could see changes to wages and working conditions."

On the other hand, some in the business community and certain political circles present the continued employment system as a more practical alternative, considering the financial burden on companies. Their argument is that extending the retirement age would raise labor costs, so it is more practical to keep the retirement age as is while allowing adjustments to pay and job duties through a continued employment system.

Lee Jongbae, a People Power Party assemblyman, recently sponsored an amendment to the "Special Act on the Promotion of Youth Employment," lending support to discussions on instituting a continued employment system. The amendment would require companies implementing a continued employment system to establish and submit youth employment plans and would oblige public institutions to reflect this in their management evaluations. While supporting the expansion of the continued employment system, he stresses that institutional safeguards must also be put in place to prevent a decline in youth employment, placing emphasis on the conditional introduction of the continued employment system.

This content was produced with the assistance of AI translation services.