Structural reform should come before extending the retirement age—this must not be approached as a vote-winning issue

The retirement age is not an issue that should be uniformly raised by law. Current law stipulates that the retirement age must be set at no lower than 60. What matters next is not the pace, but the method. Rather than simply raising the retirement age figure, the wage system, job transitions, and continued employment arrangements must be designed together so that the burden is shared fairly across generations and firms.

The government and the ruling party are currently pushing a bill to gradually raise the retirement age to 65 by 2033. The stated rationale is to bridge the gap with the National Pension eligibility age—the so-called “income crevasse.” But more important than “how much to extend it” is “how to make it a sustainable structure.”

If only the retirement age is extended while productivity and the wage structure remain unchanged, corporate labor costs will balloon, and job opportunities for young people will shrink accordingly. The Bank of Korea has estimated that for every one additional older worker, youth hiring decreases by about one person (0.4 to 1.5 people). In a Korea Employers Federation (KEF) survey as well, more than 70% of young respondents said that “extending the retirement age would narrow hiring opportunities.”

The problem is that the political sphere is approaching this massive generational shift through the logic of vote-seeking. If the seniority-based pay step system remains intact while only the statutory retirement age is extended, firms will lose the capacity to hire new workers, leaving only a “headcount battle” between generations. As the electoral influence of older voters grows, the voice of younger people becomes even smaller. That is why what is needed is not short-term popularity-seeking, but a social consensus grounded in long-term sustainability.

The wage peak system helped ease rising costs, but its effect on improving employment was minimal. Therefore, to make retirement-age policy truly effective, the wage peak system must be made more substantive, accompanied by a transition to a job- and performance-based wage system and by systems for reassignment and retraining.

Structural reform must come before any simple extension. If the wage system is shifted to a job-based model, continuity of employment can be recognized on the basis of skill and performance, and firms can maintain the productivity of older workers while keeping labor costs under control.

What is needed now is a flexible “continued employment system.” This is an approach in which firms and workers voluntarily extend contracts, and continued employment is determined according to performance and capability. The government should strengthen retraining and reemployment support for older people. When a virtuous cycle is established in which older workers shift into short-term or project-based work and younger people enter new jobs, extending working lives can become a true system of “intergenerational coexistence.”

It is also worth considering work models that allow older people to work flexibly for fewer than five days a week. Extending the retirement age does not necessarily have to mean preserving regular full-time employment. Firms should be allowed to adopt phased working-hour arrangements or flexible work systems. Through such approaches, pathways should be created so that individuals can work in ways suited to each stage of the life cycle.

More important than a legal provision that simply raises the retirement age is an institutional ladder that promotes mobility and retraining across generations. The core issue is not “how long people will work,” but “in what way they will work.”

The transition to a super-aged society is unavoidable. But the future balance of employment will depend on how we design the employment ecosystem to match it. In the legislative process, the National Assembly must prioritize practical fit and feasibility in the field over political advantage or disadvantage.

Sang-yeop Kim, Researcher, Center for Free Enterprise (CFE)

---

Original title: 정년, 연장보다 구조적 개혁이 우선, 표심 논리로 접근하면 안돼

Author: Sang-yeop Kim

Date: 2025-11-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28254