Extending retirement age to 65 may cost 30 tn won, experts say

(Kim Jae-hoon)

As South Korea’s major labor unions push for legislation to extend the mandatory retirement age to 65 by the end of the year, the debate over aging and employment is heating up once again — 12 years after the country last raised the legal retirement age to 60.

In 2013, the government extended the retirement age to 60 as a preemptive response to rapid aging, phasing in the policy from 2016. Now, with the nation officially entering a super-aged society last year — as people aged 65 and older exceeded 20 percent of the population — the issue has resurfaced amid growing concerns over longer income gaps before pension eligibility, which will rise to age 65 by 2033.

According to political sources on Sunday, the ruling Democratic Party’s Special Committee on Retirement Extension will begin full-scale discussions this week. A committee official said that while the goal of a 65-year retirement age remains, “all other aspects are subject to review,” hinting at a gradual and flexible approach. The committee is expected to deliberate on various reemployment models and the timing of the final phase-in.

While there is broad consensus on the need to find a solution for an aging workforce, experts warn that a uniform extension could hurt youth employment and place an unsustainable burden on businesses. Many now advocate for a “multi-track” model, similar to Japan’s approach, allowing multiple employment options rather than a one-size-fits-all mandate.

A report commissioned by the Federation of Korean Industries estimated that raising the statutory retirement age to 65 would cost roughly 30.2 trillion won ($22 billion) annually, including 27.3 trillion won in direct labor and insurance costs and 2.9 trillion won in indirect costs.

“Applying the same retirement rule across all industries would have an enormous shock effect,” said Kim Hyun-sok, a labor economist at Pusan National University, who authored the study.

Park Ji-soon, a professor at Korea University’s Graduate School of Labor Studies, also cautioned against a rigid legislative approach.

“Each company and sector faces very different realities. Forcing a uniform system is an outdated mindset,” he said, adding that “a pragmatic, ‘black cat–white cat’ approach like Japan’s is needed.”

Japan, which entered a super-aged society ahead of Korea, introduced a flexible framework in 2013 that allows companies to choose among extending the retirement age, abolishing it, or rehiring older workers — a model Korean experts say may be the most sustainable path forward.