Jang Yong-sung, a Commissioner of the Bank of Korea's Monetary Policy Committee, argued that extending the retirement age under the current wage system could lead to reduced new hiring by corporations, which could negatively impact young people.
During a press conference held at the Bank of Korea's subsidiary in Sogong-dong, Commissioner Jang emphasized that recent discussions on extending the retirement age (from the current 60 to 65 years) by the opposition party should be accompanied by a revision of the employment system.
He cited Japan as an example, stating, "Japan follows a method of changing the working conditions and re-contracting after terminating contracts with workers who have exceeded the retirement age," adding, "If we do the same, even if workers earn a little less, they can work a few more years, and corporations will have less burden."
He also mentioned the option of extending the contract period for non-regular workers. He noted, "Many people are entering self-employment after retirement," adding, "It's a risky choice, believing that it is difficult to make a living working only for two years." He continued, "If contracts allow for an additional two years of work after the initial two years, the likelihood of choosing to re-contract after retirement increases."
He pointed out that extending the retirement age in the current situation could harm young people. Commissioner Jang claimed, "If the retirement age is extended while the labor market remains rigid, corporations will have to continue employing high-wage older workers," stating, "This could have a negative impact on the creation of jobs for young people."
Commissioner Jang pointed out that the South Korean labor market excessively protects regular employees, which leads to such problems. He said, "Korean corporations are structured to maintain employment for a long time once they hire personnel," adding, "This is why there is a trend of reducing open recruitment and increasing the hiring of experienced workers."
He argued that increasing the flexibility of the employment system could actually contribute to job expansion. Commissioner Jang cited the research of Klenow and Hsieh, saying, "While U.S. corporations see their employment scale grow eightfold after 30 years, Mexico sees only a twofold increase, and India 1.3 times," adding, "The flexibility of employment protection systems can increase production and employment by about 5% during economic expansion periods."
Regarding monetary policy, he mentioned that he is monitoring the housing prices and exchange rate volatility in the three districts of Gangnam (Gangnam, Seocho, and Songpa). Commissioner Jang stated, "In terms of the Bank's financial stability goals, we are closely observing the recent increase in transaction volumes and the rising trend of housing prices in the three Gangnam districts," adding, "The exchange rate remains high despite the decline in the Dollar Index (DXY), which raises concerns."
Regarding the timing of additional interest rate cuts, he said, "Due to the large interest rate gap with the U.S., we must watch what the U.S. Federal Reserve does and also see if household debt continues to decrease relative to gross domestic product (GDP)," adding, "There is a lot of uncertainty."