Why South Koreans with ‘best jobs’ take only one day off per yearYoung and Old Fight Over Jobs in Korea as Generation Gap Widens
With youth unemployment near a 15-year high and the government planning to raise the retirement age, intergenerational conflict over jobs is rising in South Korea.
The jobless rate for workers aged 15 to 29 touched 11 percent earlier this year and is about four times higher than for those aged 40 and above. At the other end of the spectrum, Korea has an underdeveloped pension system and the highest elderly poverty rate in the OECD, as companies push employees in their fifties into early retirement to contain costs.
An overall unemployment rate that’s close to the 10-year average belies the difficulty facing policy makers seeking to balance the needs of the young and the old as society ages and economic growth eases after the heady gains of previous decades.
Working longer would have helped Lee Jong Ho, 59, who retired from Korea Railroad Corp. two years ago and has been looking for another job ever since. Lee’s 2.2 million won ($1,970) monthly pension isn’t enough to support him and his wife, after pouring savings into raising their children.
“Healthy people like me should work at least until 70 given that the average life span of people now is easily over 80,” said Lee. “I know that extending the retirement age could mean fewer jobs for young people. I’m willing to get paid a little less if I can keep working.”
While currently there is no official retirement age in South Korea, a typical worker’s career ends around 53, government data show. After that, many try to get by on a combination of pension payments, savings, part-time work or small business ventures.
A new law taking effect next year mandates that large companies allow employees to work until at least 60.
‘Repeating Class’
Kang Jin Ho, an English major at Hankuk University of Foreign Studies in Seoul, is 26 and still trying to get into the workforce. He’s deferred graduating for years to maximize his employment chances, as many companies limit new entry hires to people still in school. Kang’s applied for more than 70 jobs already in 2015 and has been rejected every time.
“Getting a job was so much easier for my parents’ generation, when the economy was expanding fast,” he said. “The average age of job seekers in my study group is 30.”
Projections from the Organization for Economic Co-operation and Development paint a gloomy picture for Kang and the next generation of students who will follow. The number of people 65 and older in Korea will surge from 11 percent in 2010 to more than 37 percent by 2050, according to the OECD.
Park’s Plan
The unemployment rate for those aged 15 to 29 was 9.3 percent in May, Statistics Korea said Wednesday. That’s the highest figure for May in official data going back to June 1999, and compares with 2.7 percent for people 40-49 and 2.6 percent for the 50-59 group. Young people are also seeking stable jobs and many apply for the civil service exam, which pushes up the youth unemployment rate, said Sim Won Bo, director at Statistics Korea.
President Park Geun Hye’s government will next month announce its fourth set of measures in two years to help ease unemployment among the young.
Previous efforts have included improvements to career training at school and incentives for young people to join small- and medium-sized enterprises, not just the large corporate icons that dominate the public imagination.
This time around the government may begin addressing the problems faced by Lee and Kang at the same time.
Tenure System
According to a finance ministry statement in May, financial support could be offered to companies that keep on older workers, while trimming their wages and using the savings to hire more young employees. The ministry didn’t offer further details.
Labor unions have already voiced opposition to the idea of a peak-wage system, which also runs counter to cultural traditions of basing pay on tenure and age, rather than performance.
“In a rapidly aging society with weak growth momentum, you’re going to get conflict between young and old over how to divide economic benefits,” said Lee Geun Tae, an economist at the LG Economic Research Institute in Seoul. “Young people having proper jobs is important for our growth engine, but there doesn’t seem to be an easy solution.”
Source: Bloomberg Kim ChipmanCynthia Kim
The baby boom generation already has left its mark on music, fitness and politics. Next up: retirement. While some people dream of the same “golden age” of relaxation, sun and travel their parents enjoyed, many more have looked at the numbers and decided they have to keep working. (It takes a lot of savings to finance a 30-year vacation.) For others, working is a choice. (Why give up a good income and fulfilling career?) Either way, the generation famous for rewriting the rules is now reshaping life after 65.The Situation
Demographics are forcing changes in expectations for retirement. The number of senior citizens worldwide will swell to 714 million in 2020 from 601 million in 2015, straining government benefit plans. Meanwhile, the world’s birthrate is declining. Fewer workers mean fewer people paying into pension programs. So governments are encouraging or forcing people to work longer. Twenty percent of people over 65 are still working in Japan, whose median age of 46.1 gives it the world’s second-oldest population (surpassed only by Monaco at 51.1). There’s room for growth: Surveys show 80 percent of Japanese seniors want to work. Some are finding it hard to live comfortably on pensions alone. Others share the feelings of a 69-year-old who said: “Life is boring without work.”
Source: Bureau of Labor Statistics
The Background
German Chancellor Otto von Bismarck offered the elderly the world’s first national old-age pension system in 1889. In the U.S., the first private pension plan was begun by American Express in 1875. By 1929, one-tenth of the American work force was covered under company pension plans. Yet that same year, even before the Great Depression hit, 56 percent of Americans 65 and older couldn’t support themselves. The Social Security law that passed in 1935 included a pension plan. During World War II, wage controls in the U.S. led employers to offer pensions as a way to attract workers. Private pensions expanded through the 1970s until they covered almost half of American workers. By the 1950s, retirees had money to spend and they wanted to play. The number of golf courses in the U.S. doubled from about 5,000 in the 1950s to more than 10,000 in the 1980s. America’s first retirement community, Sun City, opened outside of Phoenix in 1960. Tours and programs designed for older travelers, such as Elderhostel, founded in 1975, helped them see the world. Things began to change in 1980 with the introduction of 401(k) plans, which allowed U.S. workers to avoid taxes on income put aside for retirement. Subsequent tax-law changes removed incentives for companies to maintain traditional pension plans. Savings plans that relied on the stock market lost value with every crash and tough economic times caused many to take early withdrawals from their retirement savings. Fewer U.S. homeowners reaching retirement age have paid off their mortgages. The result: American baby boomers are poorer than their parents who golfed, lived in sunny climates and traveled.
The Argument
Baby boomers are starting retirement without much in the bank. More than one-fifth of Americans 65 and older are working and more people expect to work past traditional retirement age. They may be needed — certain industries, like construction and manufacturing, are facing shortages of skilled workers. Healthy seniors often want to stay on the job even if they don’t need the money, though in areas like academia this may be preventing younger people from advancing. Governments are certainly encouraging older people to work. In 2011, the U.K. abolished its default retirement age of 65; most people can now work as long as they want. The graying of the workforce is likely to continue. When asked what age they expect to retire, 10 percent of American baby boomers say “never.”
The Reference Shelf
Gallup has a series of polls on baby boomers and retirement.
Financial Times Magazine article, “How Japan stood up to old age.”
Bloomberg Visual Data on the impact of an aging world population.
National Public Radio interviewed older workers for its series, “Working Late.”
PBS NewsHour interactive report, “New Adventures for Older Workers.
First Published Sept. 18, 2014
To contact the writer of this QuickTake:
Victoria Stilwell at vstilwell1@bloomberg.net
To contact the editor responsible for this QuickTake:
Anne Cronin at acronin14@bloomberg.net
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The best job without vacation :Why South Koreans with ‘best jobs’ take only one day off per year
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