KDI suggests loosening age-based wage structure to stabilize employment for middle-aged and older individuals – The Hankyoreh

The Korea Development Institute (KDI), a government-funded research institute, expressed the opinion that in order to alleviate employment anxiety among middle-aged people in Korea, seniority in wages for full-time workers, where salaries increase the longer one works at one job, should be eased. In a situation where the seniority system is reducing companies’ demand for middle-aged regular workers, it is believed that extending the statutory retirement age will have little effect in alleviating employment anxiety among the middle-aged and is less justified.

KDI Focus, published by the Korea Development Institute on the 20th, included a report titled ‘Measures to restore labor market function to overcome employment instability among middle-aged and older people’. Joseph Han, a researcher at the Korea Development Institute who wrote the report, said, “In order to stimulate labor demand among middle-aged and older people, labor market systems and practices must be reorganized so that companies can more easily hire middle-aged people as full-time workers.” “We must play a leading role and promote the policy of expanding job pay in the public sector so that it spreads to private companies,” he said.

This awareness of the problem began with the fact that the employment stability of Korean middle-aged workers was significantly low. According to Statistics Korea’s Economically Active Population Survey, the ‘median years of service’ for male wage workers stopped increasing after their mid-40s and plummeted from their 50s. After lining up wage earners of each age according to the number of years of service at their current workplace, we looked at the number of years of service for the person in the middle. This means that the number of years of service generally increased until the mid-40s, but then fell sharply from the 50s. For women, median years of service did not increase further after their mid-30s.

One researcher explained that the reason why this phenomenon occurs is because middle-aged wage workers often find new jobs after involuntarily changing jobs or taking a break in their careers, which are irregular jobs. According to data from the Organization for Economic Co-operation and Development (OECD), as of 2022, the proportion of temporary employment among workers aged 55 to 64 in Korea was 33.2% for men and 35.9% for women, the highest level in the OECD. There is a gap of more than 10 percentage points with Japan, which ranks second (8.2% for men, 9.0% for women).

One researcher said, “Whatever the reason, if you leave a regular job, it is difficult to get a regular job again, which is why the proportion of irregular workers is increasing,” adding, “This is due to the rigidity of regular wages, especially the excessive seniority-based wage structure, which leads to low demand for labor among middle-aged and older people.” “It appears to be an important factor.” He continued, “In a situation where early retirement among middle-aged people is widespread, there is insufficient justification for extending the retirement age and the expected effect is low.” “It will lead to various side effects, including a decrease in youth employment,” he said.

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