September, 2021
You might have been aware that Japan has the oldest population in the world, but unknown to many, is that one of its neighboring countries will encounter a more severe aging problem and hold the title for having the highest old-age dependency ratio among developed countries – it is South Korea.
According to the report, South Korea had entered the aged society in 2017 with more than 14% of its citizens aged 65 or older. From an aging society (with aging rate exceeding 7%) to an aged society, Japan has taken 24 years for the transformation, and it took Germany and France a much longer period of time, 40 and 115 years, respectively. However, for the same transition, South Korea took only 17 years.
Last year, an article published by World Economic Forum has brought the aging population in South Korea again in the spotlight, but Korea’s leaders have been dealing with this aging challenge over the past few decades. One of the major issues is the country’s low fertility rate.
Population policy developments in Korea
In 1962, the Korean government has been focusing on family planning programs due to a rapid increase in fertility since the late 1950s which reached its highest level at a total fertility rate (TFR) of about 6.0 around 1960. The country’s TFR dropped to the population replacement level of 2.1 in 1983, however, very quickly, the side effects such as a downturn of fertility rate, an increase in the elderly and a high prevalence of selective abortions has raised new challenges. [1]
To tackle these issues, the government established a Population Policy Deliberation Committee in 1994 in the hope of working out new policy direction and measures for the future. Two years later, the Korean government abolished the anti-natal policy. Instead, they have emphasized on population quality and welfare. [1]
In 2004, a Presidential Committee on Aging and Future Society was established to develop policies regarding the low fertility rate and the aging population. The committee has published a long-term future plan named “Vision 2020”, outlining a wide range of strategic objectives, from raising the retirement age to increasing fertility rate.
In 2006, it also released a “Five-Year Plan on Aging” that includes specific measures ranging from a focus on hiring or retaining elderly workers to subsidize families to help pay for day care and education. Despite the efforts, as experts indicated, Korea’s retirement system remains on an unsustainable course. [2]
The contractual retirement age
According to the paper by Thomas R. Klassen, a Visiting Researcher at the Korea Labor Institute, a distinguishing feature for Korean workers compared to those from most other OECD countries is the contractual retirement from one’s main job at an early age. This is for most cases involuntary and followed with a “second career” in contractual work or self-employment.
Korea’s Additional Economically Active Population Survey for the Elderly shows, in 2016 the average age of retirement from the main job for workers aged 55-64 was 51.6 among men and as low as 47.0 among women. This retirement occurred to most to workers aged 50–59 with more than 50% for both men and women.
The habitually forced retirement is achieved through the so-called “glorious retirement”, “early retirement” and other mechanisms, such as transferring workers to unpopular positions. After contractual retirement, workers must continue to engage in paid jobs, hence the second career. It may be in a completely different economic sector and often comes with a step down in terms of income, job security and job quality.
Data from the OECD indicates, in 2016 the retention rate for Korean workers aged 55–59 was only 23% compared to 50% for their peers in the OECD countries. At the same time, hiring rates of jobseekers aged 55-69 in Korea is almost four times higher than the average of the OECD. As the data as shown, this unique situation in Korea has to a large extent contributed to the high poverty rates among the elderly, especially considering the low state welfare and longer life spans.
Elderly poverty
Due to labor market failures, one in two persons in Korea with the age of 65 and above live in relative poverty. Various programs and recommendation to improve the system has been discussed by the OECD in its publication on Working Better with Age: Korea. According to the report, in the long run, vocational training and changes in the labor market are needed to improve the situation for older people.
While in the short term, general protection systems should be replaced by programs that intend to support people not able to earn a decent living. Further pension reform should be carried out, such as increasing payment value of Korea’s Basic Pension so as to provide a more solid safety-net. This reform will foster the implementation of retirement pensions especially among small- and medium-sized companies.
Income poverty rates by age: older vs total population, 2016 or latest available year
Note: Data are for 2016 except for some countries.
Source: OECD Income Distribution Database, http://www.oecd.org/social/income-distribution-database.htm
However not only in Korea, poverty is also a major threat to the older persons in many other countries. “Where poverty is endemic, persons who survive a lifetime of poverty often face an old age of deepening poverty.” As global population is aging rapidly, no country is immune to the consequences. How to optimize opportunities for a healthy, secure and meaningful labor participation for the elderly so as to enhance a quality life for them should be considered by all the nations. Fortunately, some have already started.
More inclusive aging and employment policies
In Sweden, lifelong learning (LLL) is an integral part of its education and employment system. One of the characteristics of Sweden’s LLL system is that after leaving basic education, there are considerable opportunities to complete or improve the education level through adult education or various training courses within the framework of labor market policy. At the workplace, access to on-the-job training or opportunities for employees to further develop their skills is also an important part of Sweden’s LLL system. Swedish experts found that empirical evidence shows that high education level is positively correlated with the employment rate of the elderly and the higher level of vocational training is related to the longer life span of elderly workers in the labor market. [3]
In Belgium, the “Fund for Experiences” subsidizes organizations that adjust their workplaces to improve the quality of work for older workers and thus extend their working lives. It encourages employers to adjust and improve working conditions, employment opportunities, and organizations. Initiatives they support include providing opportunities for experienced workers to gain new experience through job change. In France, since the pension act of 2010, the cost of tutoring junior employees by senior employees can be fully deducted from the professional training tax. In addition, knowledge and skills transfer / mentoring is one of the most frequently covered areas in individual companies’ action plans related to the employment of older workers. [3]
As suggested by experts, governments could promote and reward volunteering, care work and artistic work among the elderly, because they would not only increase the well-being of elderly who engaged in it but also be beneficial to the economy and reduce welfare and healthcare costs. It is important to recognize that there may be short-term costs to implement these plans and programs. Nevertheless, in the long-term, the welfare benefits to the society are likely to surpass these short-term costs and economic health is going to improve as well.
This is another article from our series of JANZZ In-depth Global Labor Market Insights. If you missed our previous one on this topic, please check out Hosting more educated emigrants, Greece hopes to thrive with tech. JANZZ.technology has been observing and working with different labor markets around the globe. If you are interested in reading about any labor markets, please let us know and it might be our next topic. Stay tuned.
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[1] Nam-Hoon Cho. New Challenges for Low Fertility and Policy Responses in Korea. URL: https://neaef.org/public/neaef/files/documents/publications_pdf/young_leaders/4th/Population%20-%20Cho%20Nam%20Hoon%20YLP%20paper.pdf
[2] Neil Howe, Richard Jackson and Keisuke Nakashima. The Aging of Korea. URL: https://csis-website-prod.s3.amazonaws.com/s3fs-public/legacy_files/files/media/csis/pubs/070321_gai_agingkorea_eng.pdf
[3] European Commission. EEO Review: Employment Policies to Promote Active Ageing 2012. URL: https://www.epsu.org/sites/default/files/article/files/EEO-Review-Employment-Policies-Promoting-Active-Ageing-04-12-EN.pdf
