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Big businesses face growing union pressure to extend retirement age

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By Park Jae-hyuk

Extending the retirement age beyond 60 has become the top priority of unionized workers at major Korean companies in this year's collective bargaining talks, according to industry officials, Tuesday.

Such a request from labor unions has especially gained momentum recently, due to the envisioned shortage of factory workers after the retirements of large numbers of baby boomers born between 1955 and 1963, as well as the government's plans to induce companies to retain senior workers in Korea's aging society.

One of the latest examples of the companies being asked to extend the retirement age is Kia.

The carmaker's union has called for the extension of the retirement age from 60 to 62, if it is difficult to hire young factory workers. This demand is also aimed at eliminating the so-called "income crevasse" or the period between a worker's retirement and the start of a retiree receiving national pension payments at 63.

Hyundai Motor, the sister company of Kia, is facing even more pressure from its union to extend the retirement age to 64, considering the fact that those retiring after 2033 will be able to start receiving the national pension when they become 65 years old following the changes.

According to the Hyundai Motor union, the extension of the retirement age is what its members want to achieve the most in negotiations with management. In a survey of the union's leaders, 66.9 percent of respondents answered that the extension of the retirement age is the most urgent issue in this year's collective bargaining talks.

Given that Hyundai Motor posted record earnings last year, some industry watchers expect the carmaker's management to ask the union to choose between the extension of the retirement age or a higher wage increase.

"Although our efforts have resulted in meaningful achievements so far, the business environment facing us is tough," Hyundai Motor CEO Lee Dong-seok said in a letter to employees on Tuesday. "If our labor and management continue to maintain a good relationship this year, we will be able to generate better results."

Earlier this year, a group of labor unions at Samsung Group affiliates mentioned the extension of the retirement age as one of the 10 requests to management. Last month, steelmaker POSCO's union included this item among 21 requests to management.

In the shipbuilding industry that has faced a labor shortage, unionized workers at HD Hyundai affiliates and Hanwha Ocean, which was formerly Daewoo Shipbuilding & Marine Engineering, also urged their employers to extend the retirement age.

Considering Korea's declining population, most companies concur on the necessity of extending the retirement age, but at the same time, they claim that reforms in wage systems should come first in order to get young jobseekers employed.

The Korea Enterprises Federation said last December that a single beneficiary of the extended retirement age can reduce one permanent position. The business lobby group presumed that the beneficiary can even remove two permanent positions in a company adopting a seniority-based pay system.

"The abolishment of the seniority-based pay system is prerequisite to prevent the extension of the retirement age from having a negative impact on the creation of jobs for young people," said Kim Dong-bae, professor of Incheon National University's Division of Business Administration.

Park Jae-hyuk


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