The shipbuilding subsidiaries of HD Hyundai Group, comprising HD Hyundai Heavy Industries, HD Hyundai Samho, and HD Hyundai Mipo, jointly requested the company on April 17 to extend the current retirement age from 60 to 65 and to remove the peak wage system as part of the 2024 wage negotiations and collective bargaining. Despite facing rejection last year for a one-year extension of the retirement age, this year, they are pushing for a longer extension of five years. The unions argue that extending the retirement age is crucial to enhance the competitiveness of shipyards during prosperous times and to address the aging workforce structure.
In the manufacturing sector, particularly in industries like shipbuilding, steel, and automobiles, there is a growing agreement to raise the retirement age from 60 to a maximum of 65. This corresponds with the retirement of the baby boomer generation (born between 1955 and 1974) and tackles the shortage of skilled blue-collar workers. Labor unions assert that extending the retirement age is essential to bridge the income gap between the current retirement age of 60 and the pension eligibility age, which starts at 65 for those born after 1969.
While companies recognize the need to employ older workers due to the aging workforce and labor shortages, they argue that extending the retirement age, especially without the peak wage system, presents practical challenges. They argue that it would increase labor costs and hinder the hiring of young workers. Instead, companies are adopting the practice of “senior employment,” similar to Japan’s approach, where skilled workers nearing retirement age are rehired on a contract basis until the age of 65. However, it’s important to note that Japan underwent 32 years of social discussion before implementing the 65-year employment system in 2021.
The demand for employing older workers in the manufacturing sector is increasing due to the outflow of young talent and the aging population. Industries such as shipbuilding and steel, where skilled workers significantly impact product competitiveness and efficiency, face severe shortages. Moreover, there’s a growing interest among older individuals to continue working post-retirement, as shown by Statistics Korea’s survey on “Characteristics and Attitude Changes of the Elderly” from June last year, where the percentage of respondents aged 65 to 74 who wish to work after retirement increased from 47.7% in 2012 to 59.6%.
The Hyundai Motor labor union, which was denied its request to extend the retirement age last year (from 60 to 64), is expected to propose it again during this year’s negotiations. Similarly, other labor unions, including Hyundai-Kia, POSCO, and LG Uplus, are advocating for retirement age extensions. According to a survey by the Korea Enterprises Federation, retirement age extension was the most frequently cited issue (28.6%) in this year’s wage negotiations and collective bargaining.
However, in Korea’s hierarchical wage system, where seniority and pay levels are closely linked, extending the retirement age could significantly increase company labor costs and reduce opportunities for younger workers.
Given conflicts over retirement age extension, both labor and management are increasingly considering the alternative of “senior reemployment.” Major companies like Hyundai Motor, POSCO, and HD Hyundai Heavy Industries are rehiring skilled workers on a contract basis, extending their employment beyond retirement age. For instance, HD Hyundai Heavy Industries extended the reemployment period for skilled workers from one year to two years during last year’s negotiations. Recently, Hyundai Motor Group announced plans for its affiliates to reemploy 13,000 elderly workers until 2026.
Nevertheless, most labor unions persist in advocating for retirement age extension, as reemployed workers, despite receiving a portion of their pre-retirement salary, are treated differently from regular employees due to their contract status. An industry insider emphasized, “Conflicts surrounding retirement age extension will persist until there’s societal consensus and supportive policies in place.”
