The push for legislation to raise the retirement age to 65 is causing heightened tension among small and medium enterprises (SMEs) as the National Assembly aims for passage this summer. Critics warn that implementing a uniform retirement age without proper preparation could lead to a "labor cost disaster" and exacerbate the youth employment crisis.
According to industry sources on August 1, SMEs are strongly opposing the proposed mandatory retirement age extension primarily due to the "survival-threatening burden of labor costs." Unlike large corporations and public institutions, most SMEs still operate under a seniority-based wage system. Extending the retirement age would increase the tenure of older, higher-paid workers regardless of productivity, ultimately leading to a surge in overall labor costs.
A survey conducted by the Korea Federation of Small and Medium Enterprises last year revealed that 86.2% of SMEs with retirement systems prefer a selective reemployment approach based on job performance and health status, rather than a blanket extension of the retirement age. Only 13.8% supported the uniform retirement age increase.
Among the challenges cited by SMEs regarding the retirement age extension, the increase in labor costs was the top concern, with 41.4% of respondents highlighting it as their primary issue.
A representative from a manufacturing SME noted, "While 95% of large companies with over 300 employees have retirement systems, only about 30% of small firms with 5 to 9 employees do. Mandating employment until age 65 without considering the realities of small businesses, where early retirement and job changes are common, is tantamount to telling us to close our doors."
There are fears that forcing SMEs to retain older workers, despite insufficient labor cost capacity, will reduce opportunities for hiring younger employees.
In April of last year, the Democratic Party's Special Committee on Retirement Age proposed a compromise plan to gradually raise the current retirement age of 60 by one year every two years, reaching 65 by 2037. The committee is currently coordinating the timing for the legislation.
The SME sector is committed to finding solutions that allow for the coexistence of skilled older workers and the hiring of younger employees. A forum titled "SME Workforce Forum" will be held on August 11 at 10 a.m. in Yeongdeungpo-gu, Seoul, co-hosted by the Small and Medium Business Policy Association, the Korea Federation of Small and Medium Enterprises, and the Small and Medium Business Research Institute. The forum will focus on analyzing the impact of the retirement age extension on SMEs and discussing employment strategies that benefit both younger and older generations.
* This article has been translated by AI.
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