Mandatory Retirement at 65: Do Not Rush—Prepare Properly
Wonyong Park, ADR (Conflict and Dispute Resolution) Specialist
1. Introduction
1.1 Purpose and Necessity of This Article
Korea is on the verge of becoming a super-aged society in 2025, and due to the decline in the working-age population and the resulting decrease in growth potential, the active utilization of older workers has become inevitable.
In addition, there is a broad public consensus on the need to implement employment-extension policies to resolve the “income gap” that occurs between the statutory retirement age (60) and the commencement age for National Pension benefits (gradually being raised to 65).
1.2 Background of the Mandatory Retirement Extension Discussion
Changes in demographic structure are the main background for the discussion on extending the retirement age.
ㅇ Aging society and increased life expectancy: Falling mortality rates and a rapid increase in the elderly population are accelerating population aging, and as the baby-boomer generation enters full retirement, labor shortages are becoming more severe.
ㅇ Rising National Pension eligibility age: While the current statutory retirement age of 60 remains unchanged, the National Pension eligibility age is being gradually raised—from age 63 in 2025 to age 65 by 2033—creating an income gap of up to five years.
2. Reasons Why Retirement Age Extension Has Been Raised
2.1 Aging Population and Labor Shortage
As the retirement of the baby-boom generation accelerates, the labor shortage problem is worsening. In particular, relatively younger seniors have high levels of education and strong willingness to work, increasing the importance of utilizing their human capital by expanding their participation in economic activities.
2.2 Burden on the National Pension and Social Security System
There is an expected positive effect that increased economic participation by older adults can help stabilize pension finances and alleviate poverty among the elderly. If current trends continue, the National Pension Fund is projected to record a deficit in 2037 and be depleted by 2047.
2.3 Economic Needs of Older Workers
Most older adults wish to continue working, and due to insufficient preparation for retirement, the need to work longer after the retirement age is increasing.
2.4 Corporate and Social Productivity Perspective
Extending employment for older workers can yield positive effects by increasing the utilization of skilled labor. From the corporate perspective, it enables continued use of accumulated experience and knowledge.
3. Positions of Stakeholders
3.1 Government and Political Sphere
The current administration and ruling party have proposed legislating a phased extension of the statutory retirement age to 65 within 2025 and preparing whole-of-government support measures. The Ministry of Employment and Labor plans to seek concrete measures through social dialogue, taking into account easing the dual structure of the labor market and harmonizing the policy with youth employment. However, within the political sector, skepticism exists, as significant differences remain between labor and management and there are many obstacles to applying such policies across different job categories, making it unlikely that legislation will be passed within the year.
3.2 Labor Unions
The labor sector prefers extending the statutory retirement age, arguing that aligning the retirement age with the pension eligibility age is necessary to ensure stable post-retirement income and living conditions. Labor unions also insist on extending the retirement age without wage adjustments.
3.3 Employer Sector
The employer sector prefers maintaining the current statutory retirement age (60) and instead favors a re-employment model.
ㅇ Labor cost burden: Many companies still maintain seniority-based wage systems. If the retirement age is extended, highly paid workers would remain for longer periods, leading to a serious increase in labor costs. Rising labor costs may result in deteriorating profitability, reduced hiring, and decreased investment.
ㅇ Organizational flexibility and productivity: A strong wage–seniority correlation reduces employment flexibility and lowers the efficiency of personnel management. Therefore, employers argue that any extension of the retirement age must be accompanied by a restructuring of the wage system.
3.4 Academia and Expert Opinions
Academics and experts agree on the necessity of extending the retirement age. However, they point out that extending the retirement age while maintaining the seniority-based wage system and employment rigidity is unlikely to produce the intended positive outcomes and may instead reduce youth employment.
ㅇ Sociological and economic analysis: Studies show that a higher proportion of older workers correlates with lower corporate productivity, and this negative effect is roughly twice as strong as the impact on labor costs. Accordingly, experts recommend reforming the wage system (toward job- and performance-based structures) and making active efforts to improve the productivity of older workers.
ㅇ Legal analysis: Experts advise that the discussion on extending the retirement age should move beyond the tripartite dialogue among labor, management, and government, and should be implemented gradually and progressively through expanded social dialogue and sufficient consensus.
4. Problems and Issues Related to Extending the Retirement Age
4.1 Possibility of Distortion in the Employment Structure
According to the experience from the 2016 implementation of retirement age extension, the benefits were concentrated in unionized and large-company positions, raising concerns that it may further widen polarization in the labor market.
4.2 Limited Employment Opportunities for Young People
There are concerns that the increased cost burden on companies resulting from extending the retirement age will lead to reduced hiring of new employees, including young workers. In particular, job competition between older workers and youth is likely to intensify for high-quality jobs preferred by younger generations (large corporations, public sector), potentially worsening generational conflict. Analyses of previous retirement age extensions indicated that when the number of older workers increased by one, the number of young workers decreased by approximately 0.4 to 1.5.
4.3 Increased Corporate Costs and Decline in Competitiveness
If the retirement age is extended while maintaining a seniority-based wage structure, labor costs for companies will increase, leading to reduced corporate competitiveness and ultimately slowing economic growth. During economic downturns or restructuring periods, a uniform retirement age extension becomes a制度 difficult for companies to accommodate.
4.4 Job Suitability by Age
An aging workforce can lead to decreased productivity, personnel stagnation, and reduced organizational vitality. Without reforming HR management systems toward job- and capability-based evaluation rather than age or seniority, these problems may intensify further.
5. Practical Alternatives
5.1 Gradual Extension and Flexible Retirement Systems
To minimize side effects, the retirement age should be extended gradually and progressively, considering business size and industry characteristics. Employment extension may include options such as raising the retirement age, re-employment, or abolishing the retirement age, allowing companies to autonomously choose their preferred employment model. Japan and Singapore have also adopted re-employment systems to extend employment periods.
5.2 Wage Structure Adjustment and Performance-Based Employment
The introduction of retirement age extension must be accompanied by wage reform.
ㅇ Wage system restructuring: Active consideration should be given to transitioning to job-based or performance-based wage systems, which compensate according to job difficulty, performance, and level of responsibility rather than length of service. Under a seniority-based wage system, retirement age extension is unlikely to lead to meaningful employment extension.
ㅇ Wage Peak System: The “wage peak system,” which gradually adjusts wages after a certain age, is presented as the most realistic measure. However, this system must be supported by complementary measures, such as redesigning job roles and providing education and training opportunities. If re-employment after retirement age is chosen, companies can adopt new wage systems that reflect job responsibilities and performance to reduce wage rigidity.
5.3 Reemployment and Career Transition Support Programs
To help workers—particularly those in small and medium-sized enterprises—find better reemployment opportunities, training and reemployment services should be provided for job transition and re-skilling within or across occupational fields. The Korea Labor Foundation operates the “Middle-Aged and Senior Tomorrow Center,” providing career development planning, training, and reemployment services.
5.4 Job Design Tailored to Older Workers
To utilize the accumulated experience and knowledge of older workers and enhance their productivity, retraining and appropriate role assignments are required. Companies should introduce age-friendly human resource management systems that comprehensively improve job management, compensation, training, work environment, and retirement management for older workers. Measures may include developing jobs suitable for older workers and expanding flexible work arrangements.
6. Comparison with Overseas Cases
6.1 Retirement Age Extension Policies in Major Countries such as Japan and Singapore
ㅇ Japan: From 1998 to 2025, Japan introduced a phased roadmap for continued employment over nearly 30 years, progressing from “mandatory retirement at 60 → securing employment up to 65 → securing opportunities to work up to 70.” In particular, securing employment up to age 65 was implemented progressively over 12 years before it became a legal obligation. Japan did not adopt a uniform extension of the retirement age; instead, companies were allowed to autonomously choose among “abolishing the retirement age, extending the retirement age, or using a re-employment system.”
ㅇ Policy Support: The Japanese government provided incentives to companies through financial support, such as continued employment benefits for older workers. It also supported job redesign, training, and related initiatives through specialized agencies (such as JEED), thereby institutionally backing an “age-friendly workplace innovation.”
6.2 Analysis of Strengths and Weaknesses and Implications
Japan’s case indicates that the gradual introduction of policies and the establishment of systems based on trust between labor and management are crucial. Before legislating retirement age extension, Japan preemptively reformed its wage system in line with corporate circumstances, and this is assessed as having played a decisive role in encouraging the continued participation of older workers.
This demonstrates that the issue should not be approached merely as “raising the retirement age,” but rather as “expanding work opportunities and strengthening capabilities.”
6.3 Applicability to Korea
In Korea, wage seniority remains strong and wage system reform has been slow, which simultaneously heightens concerns about instability in jobs for older workers and reduced employment opportunities for young people.
Therefore, rather than a uniform extension of the retirement age, Korea urgently needs to establish an institutional foundation that allows the design of diverse employment models for older workers tailored to labor market structure and individual labor–management conditions. A coherent system linking wage adjustment, workplace innovation, and training must be built.
7. Measures to Minimize Side Effects
7.1 Legal and Institutional Safeguards
ㅇ Social consensus: Sufficient consensus must be reached through expanded social dialogue that goes beyond the traditional tripartite consultation among labor, management, and government.
ㅇ Gradual implementation and monitoring: A phased and gradual implementation should be accompanied by continuous monitoring and analysis of the impact on youth employment.
ㅇ Clarification of the re-employment system: If a re-employment system is introduced, legislation must clearly define termination of employment at retirement age and the establishment of a new employment relationship thereafter. Controversies regarding re-employment expectations, criteria for selecting eligible employees (health status, performance evaluations, etc.), and wage adjustments must be minimized.
7.2 Linkage with Corporate HR Systems
ㅇ Preceding wage system reform: Efforts to shift from seniority-based pay to job-, performance-, and competency-based pay should be pursued systematically and progressively.
ㅇ Flexible human resource management: Companies must move away from vertically structured seniority-based promotion systems and adopt flexible career design. This includes expanding flexible work arrangements and developing reskilling and upskilling systems tailored to different life stages.
7.3 Strategies to Ease Intergenerational Conflict
ㅇ Clear growth paths: Clear growth paths and visions should be presented so that young employees do not feel that their career progression is blocked by older workers.
ㅇ Priority for youth employment: Since the working-age population must support future elderly populations, youth should be given priority in high-quality jobs when generational competition arises.
ㅇ Intergenerational cooperation: An organizational culture of mutual respect should be fostered through mentoring and knowledge-transfer programs that facilitate natural sharing of knowledge and experience across generations.
7.4 Social Consensus and Perception Change
Extending the retirement age is not merely a policy adjustment—it requires a transformation of organizational culture and philosophy. It must be pursued as an “opportunity,” not a “burden.” Additionally, it must be clearly recognized that extending the retirement age is not a cure-all; limitations and challenges likely to arise in practice must be thoroughly examined.
8. Conclusion
8.1 Overall Assessment of the Retirement Age Extension Debate
The 2016 extension of the retirement age, implemented without accompanying wage system reform, mainly increased employment for older workers in large corporations and unionized workplaces, while causing side effects such as reduced youth employment and increased early retirements. This demonstrates that simply extending the retirement age is insufficient when seniority-based wages, employment rigidity, and the 60-year retirement system all remain in place.
In a super-aged society, sustainable employment policies for older workers must approach the issue not as “raising the retirement age,” but as “expanding opportunities to work and strengthening capabilities.”
8.2 Policy Recommendations
ㅇ Prioritize strengthening the re-employment system: Given Korea’s circumstances, the dominant view is that future policy direction should favor strengthening and improving the re-employment system after retirement, rather than extending the statutory retirement age. Re-employment is more easily linked to wage reform and flexible working conditions.
ㅇ Gradual approach: Instead of mandating re-employment by law in the short term, a step-by-step approach is required—initially promoting voluntary adoption through incentive mechanisms (employment subsidies, tax benefits, etc.), followed by a gradual imposition of obligations.
ㅇ Expansion of productive jobs: Instead of limiting older-worker jobs to welfare-type positions, incentives for expanding productive jobs for older workers—those that attract active corporate participation—should be strengthened.
8.3 Future Outlook
If continued employment becomes successfully established, older workers will secure opportunities to remain in their primary jobs for longer, which can ease growth slowdown caused by declining labor supply and enhance income stability for individuals.
If continued employment up to age 65 becomes possible, Korea’s annual growth rate is estimated to increase by 0.1 percentage points over the next decade.
To achieve this, government, companies, and workers must jointly establish flexible HR strategies centered on job roles and performance. Through such efforts, companies can find sustainable pathways for growth even in an aging society.
1. Introduction
1.1 Purpose and Necessity of This Article
Korea is on the verge of becoming a super-aged society in 2025, and due to the decline in the working-age population and the resulting decrease in growth potential, the active utilization of older workers has become inevitable.
In addition, there is a broad public consensus on the need to implement employment-extension policies to resolve the “income gap” that occurs between the statutory retirement age (60) and the commencement age for National Pension benefits (gradually being raised to 65).
1.2 Background of the Mandatory Retirement Extension Discussion
Changes in demographic structure are the main background for the discussion on extending the retirement age.
ㅇ Aging society and increased life expectancy: Falling mortality rates and a rapid increase in the elderly population are accelerating population aging, and as the baby-boomer generation enters full retirement, labor shortages are becoming more severe.
ㅇ Rising National Pension eligibility age: While the current statutory retirement age of 60 remains unchanged, the National Pension eligibility age is being gradually raised—from age 63 in 2025 to age 65 by 2033—creating an income gap of up to five years.
2. Reasons Why Retirement Age Extension Has Been Raised
2.1 Aging Population and Labor Shortage
As the retirement of the baby-boom generation accelerates, the labor shortage problem is worsening. In particular, relatively younger seniors have high levels of education and strong willingness to work, increasing the importance of utilizing their human capital by expanding their participation in economic activities.
2.2 Burden on the National Pension and Social Security System
There is an expected positive effect that increased economic participation by older adults can help stabilize pension finances and alleviate poverty among the elderly. If current trends continue, the National Pension Fund is projected to record a deficit in 2037 and be depleted by 2047.
2.3 Economic Needs of Older Workers
Most older adults wish to continue working, and due to insufficient preparation for retirement, the need to work longer after the retirement age is increasing.
2.4 Corporate and Social Productivity Perspective
Extending employment for older workers can yield positive effects by increasing the utilization of skilled labor. From the corporate perspective, it enables continued use of accumulated experience and knowledge.
3. Positions of Stakeholders
3.1 Government and Political Sphere
The current administration and ruling party have proposed legislating a phased extension of the statutory retirement age to 65 within 2025 and preparing whole-of-government support measures. The Ministry of Employment and Labor plans to seek concrete measures through social dialogue, taking into account easing the dual structure of the labor market and harmonizing the policy with youth employment. However, within the political sector, skepticism exists, as significant differences remain between labor and management and there are many obstacles to applying such policies across different job categories, making it unlikely that legislation will be passed within the year.
3.2 Labor Unions
The labor sector prefers extending the statutory retirement age, arguing that aligning the retirement age with the pension eligibility age is necessary to ensure stable post-retirement income and living conditions. Labor unions also insist on extending the retirement age without wage adjustments.
3.3 Employer Sector
The employer sector prefers maintaining the current statutory retirement age (60) and instead favors a re-employment model.
ㅇ Labor cost burden: Many companies still maintain seniority-based wage systems. If the retirement age is extended, highly paid workers would remain for longer periods, leading to a serious increase in labor costs. Rising labor costs may result in deteriorating profitability, reduced hiring, and decreased investment.
ㅇ Organizational flexibility and productivity: A strong wage–seniority correlation reduces employment flexibility and lowers the efficiency of personnel management. Therefore, employers argue that any extension of the retirement age must be accompanied by a restructuring of the wage system.
3.4 Academia and Expert Opinions
Academics and experts agree on the necessity of extending the retirement age. However, they point out that extending the retirement age while maintaining the seniority-based wage system and employment rigidity is unlikely to produce the intended positive outcomes and may instead reduce youth employment.
ㅇ Sociological and economic analysis: Studies show that a higher proportion of older workers correlates with lower corporate productivity, and this negative effect is roughly twice as strong as the impact on labor costs. Accordingly, experts recommend reforming the wage system (toward job- and performance-based structures) and making active efforts to improve the productivity of older workers.
ㅇ Legal analysis: Experts advise that the discussion on extending the retirement age should move beyond the tripartite dialogue among labor, management, and government, and should be implemented gradually and progressively through expanded social dialogue and sufficient consensus.
4. Problems and Issues Related to Extending the Retirement Age
4.1 Possibility of Distortion in the Employment Structure
According to the experience from the 2016 implementation of retirement age extension, the benefits were concentrated in unionized and large-company positions, raising concerns that it may further widen polarization in the labor market.
4.2 Limited Employment Opportunities for Young People
There are concerns that the increased cost burden on companies resulting from extending the retirement age will lead to reduced hiring of new employees, including young workers. In particular, job competition between older workers and youth is likely to intensify for high-quality jobs preferred by younger generations (large corporations, public sector), potentially worsening generational conflict. Analyses of previous retirement age extensions indicated that when the number of older workers increased by one, the number of young workers decreased by approximately 0.4 to 1.5.
4.3 Increased Corporate Costs and Decline in Competitiveness
If the retirement age is extended while maintaining a seniority-based wage structure, labor costs for companies will increase, leading to reduced corporate competitiveness and ultimately slowing economic growth. During economic downturns or restructuring periods, a uniform retirement age extension becomes a制度 difficult for companies to accommodate.
4.4 Job Suitability by Age
An aging workforce can lead to decreased productivity, personnel stagnation, and reduced organizational vitality. Without reforming HR management systems toward job- and capability-based evaluation rather than age or seniority, these problems may intensify further.
5. Practical Alternatives
5.1 Gradual Extension and Flexible Retirement Systems
To minimize side effects, the retirement age should be extended gradually and progressively, considering business size and industry characteristics. Employment extension may include options such as raising the retirement age, re-employment, or abolishing the retirement age, allowing companies to autonomously choose their preferred employment model. Japan and Singapore have also adopted re-employment systems to extend employment periods.
5.2 Wage Structure Adjustment and Performance-Based Employment
The introduction of retirement age extension must be accompanied by wage reform.
ㅇ Wage system restructuring: Active consideration should be given to transitioning to job-based or performance-based wage systems, which compensate according to job difficulty, performance, and level of responsibility rather than length of service. Under a seniority-based wage system, retirement age extension is unlikely to lead to meaningful employment extension.
ㅇ Wage Peak System: The “wage peak system,” which gradually adjusts wages after a certain age, is presented as the most realistic measure. However, this system must be supported by complementary measures, such as redesigning job roles and providing education and training opportunities. If re-employment after retirement age is chosen, companies can adopt new wage systems that reflect job responsibilities and performance to reduce wage rigidity.
5.3 Reemployment and Career Transition Support Programs
To help workers—particularly those in small and medium-sized enterprises—find better reemployment opportunities, training and reemployment services should be provided for job transition and re-skilling within or across occupational fields. The Korea Labor Foundation operates the “Middle-Aged and Senior Tomorrow Center,” providing career development planning, training, and reemployment services.
5.4 Job Design Tailored to Older Workers
To utilize the accumulated experience and knowledge of older workers and enhance their productivity, retraining and appropriate role assignments are required. Companies should introduce age-friendly human resource management systems that comprehensively improve job management, compensation, training, work environment, and retirement management for older workers. Measures may include developing jobs suitable for older workers and expanding flexible work arrangements.
6. Comparison with Overseas Cases
6.1 Retirement Age Extension Policies in Major Countries such as Japan and Singapore
ㅇ Japan: From 1998 to 2025, Japan introduced a phased roadmap for continued employment over nearly 30 years, progressing from “mandatory retirement at 60 → securing employment up to 65 → securing opportunities to work up to 70.” In particular, securing employment up to age 65 was implemented progressively over 12 years before it became a legal obligation. Japan did not adopt a uniform extension of the retirement age; instead, companies were allowed to autonomously choose among “abolishing the retirement age, extending the retirement age, or using a re-employment system.”
ㅇ Policy Support: The Japanese government provided incentives to companies through financial support, such as continued employment benefits for older workers. It also supported job redesign, training, and related initiatives through specialized agencies (such as JEED), thereby institutionally backing an “age-friendly workplace innovation.”
6.2 Analysis of Strengths and Weaknesses and Implications
Japan’s case indicates that the gradual introduction of policies and the establishment of systems based on trust between labor and management are crucial. Before legislating retirement age extension, Japan preemptively reformed its wage system in line with corporate circumstances, and this is assessed as having played a decisive role in encouraging the continued participation of older workers.
This demonstrates that the issue should not be approached merely as “raising the retirement age,” but rather as “expanding work opportunities and strengthening capabilities.”
6.3 Applicability to Korea
In Korea, wage seniority remains strong and wage system reform has been slow, which simultaneously heightens concerns about instability in jobs for older workers and reduced employment opportunities for young people.
Therefore, rather than a uniform extension of the retirement age, Korea urgently needs to establish an institutional foundation that allows the design of diverse employment models for older workers tailored to labor market structure and individual labor–management conditions. A coherent system linking wage adjustment, workplace innovation, and training must be built.
7. Measures to Minimize Side Effects
7.1 Legal and Institutional Safeguards
ㅇ Social consensus: Sufficient consensus must be reached through expanded social dialogue that goes beyond the traditional tripartite consultation among labor, management, and government.
ㅇ Gradual implementation and monitoring: A phased and gradual implementation should be accompanied by continuous monitoring and analysis of the impact on youth employment.
ㅇ Clarification of the re-employment system: If a re-employment system is introduced, legislation must clearly define termination of employment at retirement age and the establishment of a new employment relationship thereafter. Controversies regarding re-employment expectations, criteria for selecting eligible employees (health status, performance evaluations, etc.), and wage adjustments must be minimized.
7.2 Linkage with Corporate HR Systems
ㅇ Preceding wage system reform: Efforts to shift from seniority-based pay to job-, performance-, and competency-based pay should be pursued systematically and progressively.
ㅇ Flexible human resource management: Companies must move away from vertically structured seniority-based promotion systems and adopt flexible career design. This includes expanding flexible work arrangements and developing reskilling and upskilling systems tailored to different life stages.
7.3 Strategies to Ease Intergenerational Conflict
ㅇ Clear growth paths: Clear growth paths and visions should be presented so that young employees do not feel that their career progression is blocked by older workers.
ㅇ Priority for youth employment: Since the working-age population must support future elderly populations, youth should be given priority in high-quality jobs when generational competition arises.
ㅇ Intergenerational cooperation: An organizational culture of mutual respect should be fostered through mentoring and knowledge-transfer programs that facilitate natural sharing of knowledge and experience across generations.
7.4 Social Consensus and Perception Change
Extending the retirement age is not merely a policy adjustment—it requires a transformation of organizational culture and philosophy. It must be pursued as an “opportunity,” not a “burden.” Additionally, it must be clearly recognized that extending the retirement age is not a cure-all; limitations and challenges likely to arise in practice must be thoroughly examined.
8. Conclusion
8.1 Overall Assessment of the Retirement Age Extension Debate
The 2016 extension of the retirement age, implemented without accompanying wage system reform, mainly increased employment for older workers in large corporations and unionized workplaces, while causing side effects such as reduced youth employment and increased early retirements. This demonstrates that simply extending the retirement age is insufficient when seniority-based wages, employment rigidity, and the 60-year retirement system all remain in place.
In a super-aged society, sustainable employment policies for older workers must approach the issue not as “raising the retirement age,” but as “expanding opportunities to work and strengthening capabilities.”
8.2 Policy Recommendations
ㅇ Prioritize strengthening the re-employment system: Given Korea’s circumstances, the dominant view is that future policy direction should favor strengthening and improving the re-employment system after retirement, rather than extending the statutory retirement age. Re-employment is more easily linked to wage reform and flexible working conditions.
ㅇ Gradual approach: Instead of mandating re-employment by law in the short term, a step-by-step approach is required—initially promoting voluntary adoption through incentive mechanisms (employment subsidies, tax benefits, etc.), followed by a gradual imposition of obligations.
ㅇ Expansion of productive jobs: Instead of limiting older-worker jobs to welfare-type positions, incentives for expanding productive jobs for older workers—those that attract active corporate participation—should be strengthened.
8.3 Future Outlook
If continued employment becomes successfully established, older workers will secure opportunities to remain in their primary jobs for longer, which can ease growth slowdown caused by declining labor supply and enhance income stability for individuals.
If continued employment up to age 65 becomes possible, Korea’s annual growth rate is estimated to increase by 0.1 percentage points over the next decade.
To achieve this, government, companies, and workers must jointly establish flexible HR strategies centered on job roles and performance. Through such efforts, companies can find sustainable pathways for growth even in an aging society.
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