[Editorial] Extending the retirement age without cutting wages could hurt corporate competitiveness

Hyundai Motor Company and its labor union have reached a tentative wage agreement. It is a relief that they avoided the worst-case scenario of a prolonged strike and signed the deal. However, the retirement-age clause in the agreement raises serious concerns. It says that if the legal retirement age is extended, the change will be applied immediately, while the current wage-peak system will not be expanded further.
Of course, the clause is based on the condition that "it will be implemented when the law is revised." But the problem is that once the law changes, it effectively locks in an automatic retirement-age extension without wage cuts, with no separate negotiations. If that happens, the current wage-peak structure, which freezes pay at age 59 and cuts it by 10% at age 60, would be applied in the same way when the retirement-age extension law takes effect. In that case, the increase in labor costs that companies must bear is obvious.
The burden of labor costs could be even heavier for small and medium-sized companies than for large firms such as Hyundai Motor Company. The weaker a company’s bargaining power, the harder it is to resist union demands. In the end, if a retirement-age extension without wage cuts is introduced, the decline in competitiveness among smaller companies will begin first.
The bigger concern is that the direction on retirement-age extension, which the business community has tried to reach a consensus on, could be shaken. Bills related to extending the retirement age are now being actively discussed in society. Debate is under way over whether to legally raise the retirement age to 65 or extend employment through rehiring. The business community has taken the position that any retirement-age extension should adopt a rehiring system and that wage-system reform must come first. If a one-sided decision emerges from labor-management negotiations at the workplace while social consensus is still being formed, the voice of industry in the legislative debate will inevitably weaken.
The ripple effects of the Hyundai Motor case also cannot be ignored. Hyundai Motor Company is the workplace with the strongest union organization and bargaining power. The direction of its labor negotiations could influence talks across the manufacturing sector, including parts, steel, and shipbuilding.
It is true that extending the retirement age is an irreversible trend. Given aging demographics and the increase in the National Pension Service (NPS) eligibility age, it is a socially unavoidable choice. But for such an extension to be sustainable, at least two conditions must be met. First, the problems of the seniority-based wage system, in which pay rises simply with years of service, must be addressed, and a wage structure centered on job duties and performance must be introduced first. If companies are forced to bear higher labor costs from a longer retirement age while still keeping the outdated seniority system, their competitiveness will inevitably fall.
In addition, job creation across generations must be ensured. Extending the employment period of older workers should not reduce the number of new jobs available to young people. Labor unions led by middle-aged and older workers should not be accused of taking jobs through retirement-age extension while ignoring the share that should go to the young. Otherwise, conflict over jobs between generations will only deepen. The South Korean government and the National Assembly should carefully consider youth unemployment, the management difficulties of small and medium-sized companies, and the risk of weakening industrial competitiveness as they move toward legislating a retirement-age extension.