The Answer to a Super-Aging Society: Freedom to Work by Ability, Not Age Restrictions

The mandatory retirement system has long been treated as common sense in Korean society. The notion that one must stop working upon reaching a certain age is often romanticized under the label of “retirement.” Yet viewed dispassionately, the mandatory retirement system is a form of age discrimination that legally restricts the freedom to work. Excluding individuals from the workplace solely on the basis of age—rather than ability or willingness—runs counter to the fundamental principles of a liberal society.

While the reality of ultra-low fertility and rapid population aging makes continued participation of older workers inevitable, responding through legislation that uniformly raises the retirement age to 65 is not a fundamental solution. On the contrary, it risks increasing corporate burdens, reducing opportunities for younger generations, and further rigidifying the labor market.

Extending the Retirement Age Expands Labor Market Dualism and Crowds Out Youth Opportunities

Numerous studies have already shown that each time the retirement age is extended, employment among older workers rises while hiring of younger workers declines. The Korea Development Institute (KDI) found that following the mandatory retirement age of 60, every additional older worker corresponded with a reduction of 0.2 young workers. The Bank of Korea estimated the figure to be as high as 1.5. When the retirement age of 60 was introduced in 2016, the benefits were concentrated largely among regular employees at large corporations, while small firms and young job seekers lost opportunities.

The core of the problem lies in seniority-based wage systems that are disconnected from labor productivity. According to estimates by the Federation of Korean Industries, extending the retirement age to 65 would generate additional labor costs of up to 30 trillion won within five years. This burden would inevitably translate into reduced youth hiring, accelerated automation, and the relocation of production bases overseas.

The direct beneficiaries of raising the statutory retirement age would be predominantly regular workers at large firms. Meanwhile, workers at small and medium-sized enterprises, non-regular employees, special-type and platform workers, and the self-employed—who lie outside the scope of retirement regulations—would see little benefit. As a result, disparities and conflicts would widen even among older workers themselves, further entrenching labor market dualism.

Mandatory Retirement Is Employment Control by Age—Reemployment Is a More Rational Alternative

Raising the numerical retirement age does not “preserve” jobs; it merely extends administrative intervention that controls employment based on age. There is a common misconception that abolishing mandatory retirement would make all workers insecure. In reality, what is needed is to expand institutional pathways that allow individuals to continue working after retirement based on ability.

A post-retirement reemployment system is a more rational alternative than extending the retirement age. Many countries in Japan and Europe already ensure employment opportunities for older workers through continued employment systems rather than statutory retirement age increases. These systems allow firms to rehire workers selectively based on job roles and performance, minimizing generational competition for jobs. They protect the freedom to work while preserving market efficiency.

Wage System Reform and Productivity Should Take Precedence Over Retirement Age Extension

What is truly at issue today is not age, but work itself. As long as seniority-based wage structures persist, debates over retirement age will inevitably lead to higher corporate costs and intensified generational conflict. Shifting toward ability- and performance-based pay is essential for labor market sustainability. Expanding job- and performance-based compensation is not merely an adjustment to wage structures—it represents a transition toward a productivity-centered society.

A Solution for the Super-Aged Society: Freedom to Work Based on Ability, Regardless of Age

When compensation is determined by ability rather than age, older workers can continue working with their experience and skills fairly valued by the market, while firms can manage labor costs more rationally. At the same time, younger workers gain access to fairer employment opportunities. This is the most liberal and market-friendly solution for a super-aged society.

Kwang-yong Ko
Director of Policy, The Center for Free Enterprise

Korean version: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=28257