Korean Business Concerned about Proposed New Extension of Retirement Age

Korean woman with brown jacket sitting in a plaza.

Korean businesses are concerned about a burden to companies if the country’s government extends the legal retirement age in South Korea from 60 to 65. The South Korea retirement age was previously changed in 2017 from 58 to 60.  

Why Extend the Retirement Age in South Korea?

At present, there is a growing need for older workers in Korea as the population is falling amid an extremely low birth rate. Korea also has the highest rate of elder poverty in the developed world — with more than 40% of Korean’s over 65 considered poor, according to statistics from the Organization for Economic Cooperation and Development (OECD). People 65 or older are projected to account for almost half the country’s population by 2067, up from just under 15% today.

Korean Business Leaders Urging Caution

The business community is concerned that raising the South Korea retirement age would increase labor costs, labor-management conflict and increase youth unemployment in South Korea. The business community also believes the government should put in place social welfare policies and job retraining for older workers. As younger workers already possess digital economy skills, many older workers will require retraining to obtain such skills. 

Youth Unemployment in South Korea is a Problem

Korean business sees extension of retirement age as something that may hamper youth unemployment in South Korea and lead to a worsening generational conflict around employment opportunities in a changing economy. At present, youth unemployment in South Korea is at 7.2% for those between 15 and 29, according to data compiled by Statistics Korea. For some experts, extension of retirement age will reduce Korea’s economic competitiveness while increasing the gap between those older workers already in employment in large companies and younger workers trying to begin their careers. 

Foreign Firms Should Plan in Advance for Korean Market Entry or Expansion

Recent and newly proposed changes to retirement age in South Korea retirement age reflect a fast-moving employment regulatory environment in Korea. If you’re entering the market, you may want to consider an alternative approach using an Asia-focused firm that can employ on your behalf to manage the risks of employment such as GoGlobal.