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Ensuring a soft landing for baby boomers

Experts advise retirement reform, efforts to create jobs for seniors

To mark the 58th anniversary of its establishment on Aug. 15, The Korea Herald has published a series of articles on the looming retirement of Korean baby boomers and its socioeconomic impact on the nation. The following is the last of the eight-part series. ― Ed.

Keep those baby boomers in play for as long as possible. Korea, with the world’s fastest-graying population, has no other option, if it doesn’t want to lose its economic and social vitality. 

This is what experts and government officials say when it comes to the looming retirement of baby boomers, although they differ on how.

“Baby boomers are a generation with many virtues. It is essential that we continue tapping this pool of human resources effectively in order to achieve a sustainable growth and development,” President Lee Myung-bak told a Cabinet meeting on March 29.

The president called for a shift in thinking. Many Koreans view the predicted exodus of 7.12 million boomers as a national crisis in the making, fearing that it will hike welfare costs, while dampening the potential for economic growth.

But if proper measures were taken in time, the nation can eke out a soft landing, the president said. To do so, the government must draw up comprehensive measures for baby boomers as soon as possible, he said. 

The ministries of labor, health, knowledge economy and construction and the Financial Services Commission have been formulating measures to cope with the looming retirement wave. The announcement of the policy package is due in September.

The top priority in the planned baby boomer policies is on keeping them in jobs past the traditional retirement age, through reform of retirement practices or creation of new senior jobs, the government officials say. 

Baby boomers ― defined as those born between 1955 and 1963 ― are expected to exit the labor force en-mass over the next several years. The oldest in this group turned 55 last year, the retirement age in many big companies such as Samsung.

Consequences of their exit ―- many of them financially unprepared ― will be grave, as they account for nearly 23 percent of all employed Koreans.

To facilitate a gradual phase-out of the boomers, the Labor Ministry is encouraging employers to voluntarily extend retirement ages or adopt the peak wage system.

The scheme gives fifty-something workers a chance to work past the retirement. The ministry called the plan a win-win for both employers and employees, as employers can reduce the cost of retaining senior workers, while workers can delay retirement.

Plans are also in the offing to ensure the knowledge and skills that baby boomers have accumulated during decades of work are not wasted after they step back from their industries’ front lines.

One example is the “civic engagement job program,” launched by the Ministry of Health and Welfare.

The program envisions retired professionals taking up positions of advisor or manager at social enterprises or welfare institutions in order to help them to better perform with their knowledge and experience.

For instance, a retired marketing expert could lead sales and marketing efforts for a social enterprise manufacturing products with disabled workers, the ministry explained.

Private experts, however, say more drastic measures are needed.

Bang Ha-nam, a researcher at the Korea Institute of Health and Social Affairs said: “Many firms in Korea force employees to retire at 55 or 56. The retirement age should be extended to 60, at earliest, when workers start collecting pension.”

According to the Labor Ministry, the average retirement age in Korea is 57. In Japan, the retirement age is 65. Sweden’s standard is 67, while the U.K. plans to raise it to 68.

Korean baby boomers are willing to ― or forced to due to financial difficulty ― work after the traditional retirement age, experts point out. They are also well-educated, skilled workers with accumulated know-how, having lived through the country’s rapid industrial development.

“As a long term task, the country needs to identify and develop industries that can create decent jobs for senior workers,” he said.

At present, the government’s efforts are focused on creating part-time jobs in menial public services. A typical such job involves a duty of patrolling elementary schools three days a week and a monthly pay of 200,000 won.

Measures are also needed to better prepare pre ― retirees financially, experts say.

Baby boomers are expected to face financial difficulties as they spent much of their income to support their parents and children at the same time.

“Baby boomers are the first generation which can not expect their children to support them after retirement,” said Lee Chul-seon, a researcher at Hyundai Research Institute.

According to a survey by Seoul National University Institute on Aging and insurer Metlife, the average baby boomer saves a meager 170,000 won out of a monthly income of 3.86 million won.

Another study conducted by the Korea Institute of Health and Social Affairs shows that baby boomers see 2 million won as the minimum monthly living cost for their old-year life. Yet, 31 percent of them expected their actual income to fall short of that level.

About 13 percent of the boomers are not covered by any of any public pension scheme. Nearly half of them are without a private pension plan.

Experts say Korea needs to build multiple layers of social safety nets in order to prevent those boomers from falling below the poverty line right after retirement. At the same time, the government should encourage future generations to better plan for retirement, utilizing private pensions and reverse mortgage plans.

Reverse mortgages, although they are popular in the United States as a key retirement planning tool, were first introduced in Korea in 2007. Yet, they may be an ideal option for Korean baby boomers as they have more than 70 percent of their assets locked in the home they live in.

By Lee Sun-young (