Korea is experiencing much faster population ageing than any other OECD country. If nothing is done to improve the labour market situation of older workers, this could put a brake on the trend of rising living standards observed in recent decades. There is no time for complacency: the median age of the population is projected to increase from 41 years today to 55 years in the mid-2050s, and the old-age dependency ratio (population aged 65 plus over the population aged 15-64) is projected to increase from 20% today to around 70% in 2050, 20 percentage points above the then OECD average.

In a nutshell, the key challenge is to increase the quality of life and work of older workers whilst maintaining their high employment rate. Unlike in many other OECD countries, there is little choice but to work for older workers in Korea; yet work is not an effective antidote against poverty when getting old. Most people end up in poor quality jobs after ending their core career in their early 50s, with low and insecure earnings and little or no social protection. Structural reforms are needed to reduce labour market duality, which affects older workers disproportionally. Measures should be taken to reduce i) the gap between wages and productivity, which increases with age and contributes to push older workers out of regular jobs, and ii) the gap in job quality between regular and non-regular jobs. This requires tackling employers’ practices with respect to early retirement plans while at the same time moving away from seniority-based practices for setting wages and granting promotions, reforming the hiring and dismissal rules for regular and non-regular work, and strengthening social protection. Providing good opportunities for workers to upgrade their skills and learn new ones throughout their working careers is also a key requirement for fostering longer working lives in good quality jobs.

All these issues are at the heart of the policy debate in Korea. While the Tripartite Agreement, signed in September 2015 by the government, trade unions and employers associations, was a big step forward, a number of important aspects – such as employment regulations for permanent and temporary jobs – are still under discussion and have not yet received approval from the National Assembly, newly formed in June 2016. Likewise, recent government initiatives, e.g. to postpone the age of mandatory retirement, promote a job- and competency-based system for setting wages and reduce working time, could help increase workers’ productivity and improve working conditions, but questions remain as to whether these measures will be forcefully implemented. And while the gradual implementation of the National Competency Standards could help to better recognise, use, manage and reward the actual skills and competencies of the workforce, this will take time to materialise.

The aim of this report is to identify what further measures could be taken to promote more and better jobs for older workers in Korea. To respond to the policy challenges, the OECD recommends that policy makers in Korea take further action to: i) make work rewarding for older workers; ii) encourage employers to retain and hire older workers; and iii) promote the employability of workers throughout their working lives.

Measures to make work rewarding for older workers could include:

• Raising payments for persons over 50 provided by the earned income tax credit and improving the coverage among older self-employed workers.

• Broadening the coverage and increasing the generosity of the Basic Livelihood Support Programme, Korea’s social assistance measure.

• Targeting the Basic Pension to the most needy and increasing benefit amounts.

• Improving the pension scheme coverage among self-employed and non-regular workers and making the scheme financially sustainable.

• Fostering the implementation of retirement pension plans, especially in small and medium-sized enterprises.

Measures to encourage employers to retain and hire older workers could include:

• Fostering the introduction of wage peak systems to ease the postponement of the age of mandatory (early) retirement.

• Proactively promoting the implementation of job- and skill-based professional appraisal measures, instead of seniority-based practices.

• Reducing the uncertainties surrounding dismissal costs to reduce the incentive for employers to have recourse to precarious forms of employment.

• Providing additional employment rights for temporary agency workers as well as new business opportunities in the temporary work agency sector.

Measures to promote the employability of workers could include:

• Rigorously implementing the new National Competency Standards.

• Refocusing active labour market expenditures on the most effective support measures and phasing-out direct job-creation measures.

• Strengthening second-career guidance for middle-aged and older workers.

• Monitoring closely the implementation of the new guidelines on working time.

• Introducing employer-paid sick leave and a statutory cash sickness benefit to facilitate the return to the main job of workers experiencing health problems.