Aging workers at Korean companies raise concerns about survival

[Photo by Yonhap]

South Korean companies are grappling with a shortage of main workers in their 30s and 40s while the number of older staff in their 50s and 60s nearing retirement rise.

Last year, workers in their 50s and 60s at businesses with more than five employees accounted for an all-time high of 34.7 percent of the entire workforce.

The proportion of workers in their 30s and 40s, on the other hand, fell below 50 percent for the first time, raising an alarm for the country’s labor market.

The second wave of baby boomers – those born between 1968 and 1974 – are expected to enter their 50s this year, reaching the statutory retirement age of 60, leading to a sharp rise in the number of workers leading the workforce.

“High-skilled technical personnel will be able to work on-site for about five years,” said an official from a company. “Simple products can be produced in other countries with low labor costs but there may be competitiveness issues if precision products such as machinery parts for equipment manufacturing or engine components for ships cannot be produced domestically.”

On Wednesday, Minister of Employment and Labor Lee Jung-sik held a meeting with experts on employment and labor policy for the middle-aged and elderly, and raised the need to reform the wage system so that people can stay employed until their retirement age or continue to work after retirement.

He also called for an improvement in the national pension system to allow workers to earn labor income while partially receiving their pension.

Park Yoon-soo, professor of economics at Sookmyung Women’s University, noted that “when middle-aged and older workers change jobs, there is an inefficiency in which various experiences accumulated over a long period of time at the current job are lost.”

“It is more efficient to make the seniority-based wage system more flexible,” Park said.

Professor Lee Jong-sun from Korea University Graduate School of Labor Studies emphasized, “We need to promote the continued employment of older workers while rationally adjusting their wage levels.”

Kang Sung-jin, an economics professor at Korea University, echoed the view, saying that “the issue of vacant positions in the manufacturing sector, which requires young workers, is serious.”

“We have no choice but to lower the threshold for foreign labor in labor-intensive industries that domestic workers avoid,” Kang said.

An analysis by Maeil Business Newspaper of long-term fiscal outlook data from the Organization for Economic Cooperation and Development (OECD) revealed that the annual average growth rate of potential employees in Korea, which increased by 1.15 percent per year from 2010 to 2020, is expected to decrease to 0.12 percent from 2020 to 2030.

This means that the employment level generated when the economy grows at its potential growth rate will decrease.

The annual average employment growth rate is expected to start to fall to -0.82 percent from 2030 to 2040.

The employment ministry estimates that an additional 894,000 jobs will be needed to maintain growth prospects until 2032. But the reality is challenging.

The number of employed people will decline by up to 2 million from 2023 to 2031, according to the Federation of Korean Industries.

If additional workers are not brought in to offset the declining number of employees, it is likely to lead to production setbacks.

According to the OECD, Korea, whose economy expanded at an annual average rate of 2.53 percent from 2010 to 2020 to rank 10th among 38 OECD countries, is projected to see a drastic reduction in growth to 0.69 percent (35th place) from 2030 to 2040.

Its annual growth rate is projected to fall to -0.03 percent from 2050 to 2060.