Citing the changing demographic structure in South Korea, the finance ministry has raised the issue of whether the country should extend the retirement age to 65 from the current 60.
Kim Hyesung reports.
The number of people aged over 65 is expected to increase by 480-thousand each year over the next decade and surpass 10 million by 2025, when they'll account for 20 percent of the population in Korea.
This means that the already shrinking working age population, those aged between 15 and 64, will face a greater burden with each one having to support an elderly person by 2065.
Government spending on the elderly, including pensions, is also expected jump by an annual average of 14-point-six percent and top 14 billion U.S. dollars by 2022.
"Korea has the fastest aging population in the OECD. With a fertility rate below one, this changing demographic puts a burden on the government in terms of spending and pensions that could result in a fiscal budget deficit and slower economic growth. It might be necessary to delay the retirement age, just as Japan and some European countries did a couple of years ago."
According to Statistics Korea, delaying it from 60 to 65 could postpone a spike in the elderly care burden by nine years.
But at the same time, it could shift it to private companies.
"Productivity among the elderly population differs across sectors. It could benefit some high-skilled manufacturing sectors, but result in lower productivity in some service sectors. Korea just extended the retirement age to 60 in 2016. As the burden of wage payouts grows, companies might hire fewer new employees."
Data from the Korea Institute for Health and Social Affairs show that if the proportion of elderly people among the employed goes up by one percentage point, that of young people goes down by zero-point-eight percentage points,... which could worsen the already high youth unemployment rate of around 10 percent.
An aging population and shrinking working age population is a complicated problem that affects the labor market and the social welfare system.
The finance ministry will announce its policy on dealing with these changing demographics later this month.
Kim Hyesung, Arirang News.
