Worker Problem
Korean companies will have to bear more than 115 trillion won (US$99 billion) in additional labor costs for five years in the case where compulsory retirement is raised to 60 without a wage peak. The annual average costs are equivalent to 2.6 times the extra costs attributable to the expansion of the scope of the ordinary wage.
The Korea Employers Federation released its estimates of the costs expected to follow compulsory retirement at 60, which cover a five-year period starting from 2017, at a panel discussion held on July 20 at the Press Center in Seoul.
By its calculation, the five-year extra costs reach 37.1168 trillion won (US$32.0181 billion) for companies having 300 employees or more, where the extension of the retirement age is put into force in Jan. next year. During the same period, the additional labor costs amount to as much as 77.9734 trillion won (US$67.2677 billion) for smaller firms, in spite of their one-year grace period, due to the large number of employees.
The federation’s estimates are likely to become a reality, because the wage peak is spreading at a slow pace as of late. As of June 2014, only 23.2 percent of large enterprises adopted it, and 9.9 percent of total companies did. As the introduction of the wage peak is not mandatory, a number of employers and employees are predicted to clash with each other during their wage negotiations for this year.
According to the Korea Labor Institute, the annual salary of long-service employees amounted to 310 percent of that of new employees in Korea last year, whereas the percentages stood at 190 percent in Germany, 140 percent in France, 150 percent in Britain, and 240 percent in Japan.
However, the productivity of workers aged 55 or older was 60 percent of that of those aged 34 or less. Under the circumstances, employers are calling for not only a wage peak but also a comprehensive reform of wage systems themselves.