In South Korea, which has officially become a super-aged society, the active utilization of older workers is inevitable to mitigate labor supply shortages and sustain economic growth potential. Additionally, the strong willingness of older adults to continue working, combined with the income gap after retirement, makes it an urgent task to build a “labor market where the elderly can work productively for longer.”
The statutory retirement age extension implemented in 2016, without reforming seniority-based wage systems, increased elderly employment, but the benefits were concentrated among unionized large enterprises, leading to unintended adverse consequences such as a decline in youth employment and increase in early retirements. Specifically, empirical estimates suggest that an increase of one older worker led to a decrease of 0.4 to 1.5 young workers, with this displacement effect being most pronounced for job openings at large enterprises—precisely the sector most favored by young job seekers. Over time, the increase in elderly employment has moderated, suggesting that firms have attempted to offset the additional labor costs from the statutory retirement age extension through personnel and labor policies such as early retirement inducements. These findings show that policy reform that extends the retirement age while retaining seniority-based wage systems and employment rigidity fails to achieve its intended effects.
Japan, which became a super-aged society earlier than South Korea, established a phased roadmap for elderly employment: retirement age of 60 → guaranteed employment until 65 → guaranteed job opportunities until 70, implemented over about 30 years (1998-2025). Specifically, guaranteeing employment until 65 took 12 years to become a legal obligation, achieved through incremental increases in the eligibility age (one year every three years) to ensure gradual adoption. Wage system reforms and adjustments were concurrently introduced to support this framework.
Drawing from South Korea’s 2016 retirement age adjustment and Japan’s gradual approach, the preferred policy direction for promoting continued employment among older workers is to prioritize post-retirement reemployment over simply extending the mandatory retirement age. Given Korea’s seniority-based wage system, rigid employment structures, and mandatory retirement age of 60, relying solely on extending the retirement age risks repeating past adverse outcomes—particularly youth employment contraction—as seen in the post-2016 reforms. Conversely, enhancing the post-retirement reemployment framework provides an advantage in promoting continued employment of older workers as it allows for wage system reform and flexible adjustment of working conditions. However, immediate legal mandates for reemployment may hinder efforts to reform rigid wage systems, potentially creating new unintended consequences. Accordingly, it is advisable to first promote voluntary reemployment through incentives, followed by a phased introduction of employer obligations to ensure sustainability.
If continued employment of older workers is successfully established, they will have greater opportunities to engage productively in their lifelong careers over a longer period of time. This approach can mitigate growth slowdowns caused by shrinking labor forces while improving individual income stability. According to this study’s simulation, continued work until age 65 is projected to increase the GDP growth rate by 0.9 to 1.4%p over 10 years (0.1%p annually). During the income gap period (ages 60 to 64), monthly earnings are projected to rise by KRW 1,790,000 compared to participation in government senior employment programs. Pension benefits from age 65 onward are also expected to increase by KRW 140,000 per month.