Hyundai’s ‘Continued Employment’ Experiment | The DONG-A ILBO

Last week, Hyundai Motor Company and its labor union concluded their wage and collective bargaining negotiations, presenting several noteworthy points. Notably, Hyundai’s labor negotiations, once synonymous with summer strikes, have now been settled for the sixth consecutive year without a strike. This marks the longest strike-free period since the union was established in 1987. Based on record-breaking performance, wage increases have also reached unprecedented levels. The union estimates that the wage increase, including bonuses, amounts to an average of 50 million won per employee. Online communities are buzzing with posts that Hyundai’s new university graduate recruits will earn a starting salary exceeding 94 million won, drawing envy from young workers.

The expansion of reemployment for retirees has captured the attention of middle-aged workers. Hyundai is implementing a “skilled workers reemployment” system, allowing production workers to continue working as contract employees for one year after the standard retirement age of 60 if they wish, and this period will now be extended to two years. Although their annual salary will be reduced to the level of a recruited worker, this effectively extends their retirement age to 62. This compromise was reached considering that half of Hyundai’s union members are over 50 and more than 2,000 employees retire yearly. For the company, this means leveraging skilled workers at relatively lower labor costs while employees can avoid the income gap they face after retirement.

Hyundai’s reemployment strategy is drawing attention as a potential solution to the labor shortages caused by low birth rates and an aging population. This year, the number of people aged 65 and over surpassed 10 million for the first time, pushing South Korea to the brink of becoming a super-aged society. Even if the government achieves its target of raising the current abysmal fertility rate to 1.0, there is a gloomy projection that the working-age population will be halved by 2070. As Hyundai is doing, the sharp decline in the labor force can be mitigated by reemploying workers beyond the standard retirement age.

Japan, which experienced a super-aged society earlier, institutionalized the use of elderly workers long ago. Although Japan’s statutory retirement age is 60, similar to South Korea’s, Japanese workers can work until 65 if they wish. This is because companies are mandated to select one of three options: extend the retirement age to 65, abolish the retirement age altogether, or continue employment through reemployment. Since 2021, companies have been obligated to “make an effort” to employ people up to age 70. Though this is not mandatory, it is a clear recommendation.

There seems to be little disagreement in South Korea about overhauling the retirement system to allow work beyond 60. With the retirement wave of the 9.45 million-strong second baby boom generation beginning earlier this year, there is no time to delay. However, if the current seniority-based pay system is maintained and the retirement age is extended indiscriminately, as some labor groups advocate, companies facing increased wage burdens may reduce the hiring of young workers, exacerbating generational conflicts. In the current dual labor market structure, the benefits of extended retirement may be concentrated only among regular employees at large corporations. Meanwhile, many small and medium-sized manufacturing companies, already struggling with labor shortages, have seen the retirement age become a moot point. It is up to the government and the National Assembly to create a framework that can spread Hyundai’s continued employment experiment across the entire industry.