Unilateral extension of retirement age only makes older regular workers laugh
Yonsei University researchers analyze the impact of retirement age extension
news/cms/202411/06/rcv.YNA.20240723.PYH2024072311210001300_R.jpg" data-width="2835" data-height="1890" /> enlarge photo [사진 = 연합뉴스]
Amid the growing controversy surrounding the extension of the retirement age in line with the rapid aging population, a study showed that the wages of the 3050 generation, which is the backbone of the Korean economy, will decrease due to the extension of the retirement age for the elderly. This is because companies will first reduce the number of middle-aged and older full-time workers with high wages to offset the increased costs caused by hiring older people. There are concerns that extending the retirement age could trigger generational conflict without reforming the current seniority-based wage system.
According to the paper ‘Young, middle-aged, and elderly: Ripple effects of urban aging’ obtained by Maeil Business Newspaper on the 5th, researchers from the Department of Economics at Yonsei University (Jong-gwan Lee, Young-gyu Shim, and Hee-seung Yang) said that a law to extend the retirement age to 60 years or older will be implemented in 2016. As a result, changes in workers’ wages by age were analyzed. Until now, analysis of the effect of extending the retirement age has focused on the increase or decrease in the employment rate, but this is the first study to examine the effect on wages.
According to the study, from 2013 to 2019, when the proportion of older workers aged 55 to 65 increased by 1 percentage point, the wages of all workers decreased by 0.63%. The effect of wage reduction was concentrated on the middle-aged (36-54 years old) and senior citizens. The wages of the middle-aged, where most wage earners are concentrated, decreased by 0.9%, and the amount of money received by the elderly also decreased by 1%. The impact on young people’s wages from ages 16 to 34 was minimal.
Contrary to the general expectation that as the number of elderly workers increases, the scarcity of non-elderly workers will increase and their wages will rise, the opposite analysis has emerged. Professor Yang Hee-seung said, “It seems that companies that need to maintain high-cost employment of the elderly would have encouraged early retirement of the middle-aged rather than hiring fewer new employees.” In fact, during the same period, when the number of elderly workers increased by 1 percentage point, the number of middle-aged full-time jobs decreased by 0.9%. On the other hand, the number of temporary workers (non-regular workers) in the same age group increased by 1.3%.
The elderly population, whose employment has expanded, also saw more irregular jobs than high-quality jobs. When the number of elderly workers increased by 1 percentage point, the number of regular workers in the elderly group increased by only 0.6%, but the number of non-regular workers increased by 1.8%. The researchers pointed out that “extending the retirement age only benefits some workers, mainly older full-time workers.”
news/cms/202411/06/news-p.v1.20241105.44f04d16247a42f19ff834bca0624cbc_R.jpg" data-width="860" data-height="451" /> enlarge photo [사진 = 연합뉴스]
With the recent government’s decision to extend the retirement age for public servants as a signal, discussions on the extension have spread to local governments, universities, etc., and this is attracting attention because it has proven the side effects of unilaterally extending the retirement age.
In Korea, where the economically active population is rapidly decreasing due to low birth rates and aging population, it is inevitable to utilize the elderly population, so it is pointed out that social consensus is needed on various continuous employment measures, such as extending the retirement age and re-employment after retirement.
On this day, the People Power Party decided to propose a bill early next year that would gradually extend the legal retirement age, currently 60, to 65. Cho Kyeong-tae, chairman of the People Power Party Gap Reduction Special Committee, said, “Because there is a burden on companies, it is more reasonable to sequentially link the national pension to the age of receiving it.” The current national pension age of 63 will be extended to 65 from 2034, and the retirement age will be gradually increased to 65 in line with this point.
However, many point out that in order to prevent the side effects of extending the retirement age, it must be accompanied by comprehensive labor reform, such as reforming the seniority-based wage structure and guaranteeing employment flexibility. Chairman Cho said, “It was mentioned that extending the retirement age should not take the form of taking away jobs for young people.”
