gettyimagesbank

Major business conglomerates in Korea are facing increasing pressure to extend the retirement age of their workers in response to demographic changes caused by a declining birthrate and an aging population.

Debate on the topic is gaining momentum after the government decided to consider extending the compulsory subscription period for the national pension by five years, raising it to 64, due to longer life spans.

Most conglomerates set the retirement age at 60, so they are beginning discussions on whether to increase it in line with the government's initiative.

Experts argue that companies have no choice but to follow suit due to the sharply declining birthrate. However, they also urge the government to provide more corporate tax benefits in exchange for extending the retirement age or reemploying workers on a contract basis.

“Reflecting on the demographic changes, companies will have to extend the retirement age of their workers in the end,” said Kim Dae-jong, a professor of business administration at Sejong University.

“But the decision can also be viewed as a measure for creating jobs for the elderly, so the government needs to provide more tax incentives to companies, especially as their corporate tax burden is higher compared to other countries.”

As of 2024, Korea's corporate tax rate stands at 24 percent, higher than the OECD average of 22 percent.

Unionized workers and management at Hyundai Motor recently reached an agreement allowing skilled workers to be reemployed for up to two years after reaching retirement age.

General Motors (GM) Korea is also optimistic about reemploying retired workers. The carmaker's labor and management decided to seek measures to let retired workers continue to work from 2025.

Other labor experts suggest that more companies will follow the example set by Hyundai Motor and GM.

“Given the potential side effects of extending the retirement age, large companies are likely to adopt similar measures by reemploying some skilled workers for a few additional years,” said Lim Young-tae, director of the employment and social policy department at the Korea Enterprises Federation.

The side effects include increased labor costs for companies and a potential decline in employment opportunities for younger workers, according to Lim.

Unionized workers at other major conglomerates are also bringing this issue to the negotiating table with management. SK hynix, POSCO, and HD Hyundai are calling for an extension of the retirement age to up to 65.

The demand arises because workers will be eligible to receive their national pension at the age of 65 starting in 2033, up from the current age of 63.

According to data from the Ministry of the Interior and Safety, 19 percent of Korea's population is aged 65 or older. When more than 20 percent of the population is 65 years or older, international organizations classify it as a super-aged society, according to the United Nations.

However, officials at major conglomerates expressed concerns that extending the retirement age could lead to increased labor costs.

“The extension of the retirement age is socially desirable amid the aging society, but companies cannot push ahead with the drive unless the government offers a concrete set of tax incentives,” an official at one conglomerate said.

“Additionally, companies may be less inclined to hire younger workers due to the cost burden associated with employing elderly workers.”