Gov't urged to reform wage system, labor market simultaneously
By Lee Kyung-min
Employment extension has emerged as a political hot potato after President Moon Jae-in triggered a debate Feb. 11 over whether the country should allow older people to work beyond their retirement age to cope with demographic challenges.
Critics say that extending employment is only a pretext for extending the retirement age, a thorny issue that sparks generational conflict and heated protests from businesses amid the prolonged economic slowdown.
The issue was brought to the fore after President Moon said it was high time for the country to seriously discuss the issue at a recent meeting with labor ministry officials.
"The only way for the country to deal with the rapid fall in the economically active workforce is to maximize the economic participation of women and the elderly," Moon said.
The issue warrants a debate amid the growing need for effective workforce utilization as Asia's fourth-largest economy is one of the fastest-aging societies.
Yet little progress will be made without prior discussions on concrete ways to overhaul the current seniority-based wage system and increase labor flexibility.
Young jobseekers outraged
"It is simply irresponsible," a jobseeker surnamed Kim, 29, said.
"Landing a job is getting more and more difficult these days due to the economic downturn, as old people try to keep holding onto the limited number of jobs and government policy support for them means young people are being deprived of opportunities to lead a decent life," he said.
Their collective anger and frustration is understandable and may even be justified, but these very people are neglecting to consider the fact that they too will become old someday and be pressured to give up work just because the law requires it, accoridng to Korea Development Institute (KDI) Public Finance and Social Policy Department head Lee Tae-suk.
"The young people's protest is a bit short-sighted," Lee said.
"The extension ― regardless of the word choice ― will take at least two or three decades, and they are the very age group that will benefit. I understand they are pressed for time to land a job to start life, but framing this as someone gaining at the expense of others is neither a correct nor constructive way to view the issue."
The ultimate objective should be to ensure job opportunities for everyone, not obsessing over setting a certain age to limit people's potential to contribute to the economy and lead a dignified life, the KDI head researcher said.
In his view, the government's job initiative therefore should be a two-pronged approach: reduce uncertainty for the young and increase security for the elderly.
"It is not about pushing for immediate results. It is about asking the right questions and having the right discourse to move the country in the right direction," Lee said.
Wage system, layoffs
A deeper and underlying concern driving the debate is the seniority-based wage system and rigid labor laws under which businesses are almost unable to fire workers.
A growing number of young people seeking jobs only at large conglomerates or state-run organizations is both evidence and a warning sign of what values are prioritized by the country's next generation, according to a labor economics expert.
"They are well aware that if you start in the wrong place, it will be harder to get out of there," Dankook University economist Kim Tai-gi said.
"Adding to such judgment is the seniority-based wage system whereby continued pay rises and job security are guaranteed regardless of performance," the former chairman of the Korean Labor Economic Association added.
Korea is infamous for the wide pay gap between workers at large or state-run firms and other companies.
The former are highly protected in terms of job security, wage increases, union rights, working environment and overall corporate benefits, while the rest ― mostly irregular workers ― are left vulnerable in every way imaginable.
Given the sobering reality, pushing for the employment extension without due measures to bolster youth employment will exacerbate the "polarization," Kim said.
"Under the current system, a large number of baby boomers nearing retirement age receive more than double or triple the wages given to young workers. Without a way to overhaul the wage system, the discussion is meaningless."
The view is echoed by Lee who supports ways to strengthen job opportunities over reductions in pay.
"Those able and willing to work should be able to do so, which goes a long way to adopting a wage system that rewards workers for performance and not seniority. A backlash from workers that benefit under the status quo can be managed with a proper and reasonable set of revised evaluation criteria," Lee said.
Corporate profit will be severely undermined due to what is likely to become non-negotiable, high labor costs without management's discretion to lay off workers, according to an official at Korea Economic Research Institute (KERI).
"The discussion itself is a step in the right direction, but we have our hands full with unwanted side effects from the previous retirement extension," the official said on condition of anonymity.
Korea's retirement age was extended to 60 from 58 in 2016 following a related law revision in 2014.
The official stressed that without an overhaul of the wage system and grounds for layoffs, businesses will have to bear the full brunt of the rise in labor costs with a drop in productivity which will see their competitive edge severely undercut on the global stage.
"Many firms pay workers based on how many years they have worked, not on performance. Any hasty move to force the idea will destroy the business amid the steeper-than-expected downturn. Hiring and firing workers should be about corporate performance and not workers, not when corporate survival is on the line."