Employment policies needed for second-generation baby boomers

There are voices of concern that Korea severely lacks preparation for the upcoming retirement of 9.54 million second-generation baby boomers, which starts this year. 18.6% of the population will gradually exit the workforce within 10 years, with the population of future generations rapidly decreasing, making a labor shortage unavoidable. Despite this situation, ‘young retirees’ in their 50s with experience and expertise say that they cannot get work opportunities other than temporary jobs or low-wage simple jobs.

The second-generation baby boomers born between 1964 and 1974 are mostly in their fifties and reaching their 60s for the first time this year. The number of college graduates exceeds that of the 7.05 million first-generation baby boomers born between 1955 and 1963, who got hired without much difficulty and worked for decades. The Bank of Korea forecasts that the retirement of this generation would erode Korea’s annual growth rate by up to 0.38%.

Second-generation baby boomers are highly educated, in good health, and motivated to work until they are in their 70s or older. In small and medium-sized businesses, avoided by the younger generation, factories will be difficult to run if skilled workers of the second-generation retire. It is profitable for the country the baby boomers to remain in the workforce, as it will delay the depletion of the national pension while maintaining the workforce. The Organization for Economic Co-operation and Development (OECD) also recently advised that “increasing working life expectancy and senior employment will improve gross domestic product (GDP) as well as fiscal conditions.”

However, this will require a fundamental revamp of the retirement age system and rigid seniority-based wage structure. The United States and the United Kingdom abolished retirement age a long time ago to eliminate age discrimination against workers. European countries are delaying pension benefits and increasing the working age to the mid-60s. Japan, where the legal retirement age is 60 like Korea, has reorganized its system so that companies can continue employing workers until the age of 70 while lowering wages through contract renewal.

Hyundai Motor Company’s labor and management recently agreed to allow retired technical and maintenance workers to work for two more years at new starting wages, which is a meaningful change. With more companies making changes, this would significantly alleviate the issue of a declining working population. The government should also prepare various re-employment programs to leverage the capabilities of second-generation baby boomers to prevent labor shocks.