South Korea’s political landscape is actively debating a proposal to raise the mandatory retirement age from 60 to 65, a move that past cases suggest could negatively impact youth employment. In a labor market where dismissals are not easily enforced, extending the retirement age without complementary measures may further limit job opportunities for younger workers. While the policy seeks to address income discontinuity caused by pension reforms and labor shortages, concerns are mounting that advancing the plan without additional safeguards could repeat previous missteps.
According to political sources on Mar. 19, the main opposition Democratic Party (DP) has established an internal task force to push for legislation on the matter in the latter half of the year. The proposal to gradually extend the legal retirement age from 60 to 65 is also included in the party’s recently unveiled agenda, which outlines 20 key public welfare initiatives. The ruling People Power Party (PPP) has also acknowledged the necessity of extending the retirement age.
Three primary approaches have been proposed for implementing the change: increasing the minimum statutory retirement age from 60 to 65 or beyond, maintaining the current retirement threshold but allowing employees to be rehired under new contracts, or eliminating the retirement age altogether. Companies also retain the option to voluntarily extend the retirement age beyond 60, as current law only mandates a minimum threshold of 60.
The DP, in collaboration with the Federation of Korean Trade Unions (FKTU), is advocating for a broad-based legislative extension, mirroring the 2013 reform that raised the minimum retirement age from 55 to 60. However, research indicates that such policies have adversely affected youth employment.
Kim Yoo-bin, a senior research fellow at the Korea Labor Institute (KLI), presented findings at a forum hosted by the Presidential Commission on Ageing Society and Population Policy in November, revealing that after the retirement age was raised to 60, businesses with mandatory retirement policies saw employment rise by an average of 2.87 positions. However, new hires among younger workers declined by 0.61 positions. The impact was particularly pronounced in large corporations with over 1,000 employees, where youth employment fell 11.6% within seven years of the policy’s implementation. “The decline in youth hiring was most significant at major firms, which are highly sought after by young job seekers,” Kim noted.
Song Heon-jae, an economics professor at the University of Seoul, also found that setting the mandatory retirement age at 60 resulted in a 16.6% decrease in employment among young people aged 15 to 34.
The shift in hiring practices at major South Korean corporations coincided with the increase in the retirement age. Many companies have moved away from open recruitment for entry-level positions, opting instead to hire experienced professionals on a rolling basis. A source at a large corporation stated, “With already limited labor flexibility, extending the retirement age has made us even more cautious about hiring new employees.”
Lim Young-tae, head of employment and social policy at the Korea Employers Federation, emphasized the risks, stating, “We have already tested extending the statutory retirement age, and all it did was exacerbate labor market polarization. There are multiple ways for people over 60 to remain in the workforce, but these decisions should be left to businesses.”
A corporate representative echoed these concerns, warning that without supplementary measures, rising labor costs could force companies to scale back full-time positions and further restrict youth hiring. “Regulatory changes must be implemented to ensure that wage system reforms are feasible,” the representative said.
Meanwhile, the FKTU dismissed concerns over youth employment, citing studies suggesting the impact is minimal or even positive. “Given the ongoing population decline, particularly among younger demographics, concerns over intergenerational job displacement are overstated,” the organization said.
