'Retirement at 65 hurts productivity': 80% of small business owners prefer rehiring over raising mandatory retirement age

K, who runs a publishing company in Seoul, has been wrestling with a dilemma as discussions over raising the mandatory retirement age gain traction within the government and ruling party. While he understands that his employees want to work longer, he opposes a blanket extension of the retirement age that would require companies to keep all workers on indefinitely. His reason: productivity declines with age.

"As people get older, their productivity inevitably falls," K said Wednesday. "I think the right direction is rehiring rather than extending the retirement age." He added that workers who reach retirement age want to keep working because of job insecurity, "but from the company's perspective, it doesn't help productivity. It's hard for them to keep up with younger workers."

K's concern is widely shared among small and medium-sized enterprise owners. The Korea Federation of Small and Medium Business surveyed 304 SMEs with 30 or more employees and a mandatory retirement policy in November last year. Some 86.2 percent of respondents said selective rehiring was the preferred method for extending employment beyond retirement age, while only 13.8 percent favored a statutory extension. Under selective rehiring, companies decide whom to retain based on job performance, health and other criteria, and can negotiate new employment terms — including duration and pay — through a fresh contract.

The most commonly cited burden of raising the retirement age was higher labor costs, at 41.4 percent, followed by workplace safety and health concerns at 26.6 percent, reduced hiring opportunities for younger workers at 15.8 percent, and declining productivity and work efficiency at 12.2 percent. Some 67.8 percent of respondents said they already extend employment beyond the retirement age — for example, by rehiring retirees on short-term contract arrangements. And 75.7 percent said they pay workers retained beyond retirement at roughly the same wage level as at the time of retirement; 23.3 percent said they reduced pay, while 1.0 percent said they increased it.

On the factory floor in the provinces, however, the view is starkly different. Kang Young-jun, chief executive of Richness, a sheet-metal company in Hwaseong, Gyeonggi Province, said workers in their 60s should be seen not as aging labor but as skilled tradespeople. "Today's 60-year-olds are nothing like the 60-year-olds of the past — they are stronger and more capable, and time has made them skilled workers," Kang said. "They do the job better than younger people." He noted that for physically demanding factory work, finding young recruits is already difficult. "If young people won't even come to your company, keeping experienced workers on through an extended retirement age is a win for everyone," he said.

Public opinion broadly supports raising the retirement age. A survey commissioned by the Federation of Korean Trade Unions and conducted by Macromill Embrain, released June 7, found that 88.3 percent of respondents supported gradually raising the statutory retirement age from the current 60 to 65. The top reason cited — in a multiple-answer question — was financial insecurity caused by the gap between the retirement age and the age at which national pension benefits begin, at 69 percent. Some 50.7 percent said longer lifespans meant people could work longer and lead more meaningful lives. Shortages of skilled workers and the value of retaining older workers' expertise each drew around 39 percent support.

The contrasting experiences of K and Kang illustrate how views on raising the retirement age diverge sharply even within the SME sector, depending on industry, region and job type. In regional manufacturing — including foundational industries and so-called 3D jobs (dirty, dangerous and difficult) — replacing experienced workers in their 60s is difficult, making it important to keep them on. By contrast, office-based businesses in publishing, content, administration and services tend to have a larger pool of potential hires and are less inclined to support a blanket extension.

In regional manufacturing, as Kang's case illustrates, finding workers to replace those in their 60s is often simply not possible. In trades such as sheet-metal work, welding, die-casting, foundry work, equipment maintenance and quality inspection, on-the-job experience drives productivity. Even when young workers do join, it takes years to develop the necessary skills — and many avoid the hard physical work altogether, making recruitment difficult in the first place. In these industries, raising the retirement age is seen less as a welfare measure for older workers and more as a strategy for keeping production lines running.

The picture is different for office-based SMEs in Seoul and the broader metropolitan area. As demand grows for skills in editing software, online marketing, data management and AI-related tasks, the ability to adapt quickly to new ways of working has become increasingly important. In these sectors, job performance and adaptability matter more than age. Voices are growing for an approach that favors rehiring retirees on fixed-term or short-term contracts for specific roles, rather than raising the retirement age across the board.

"It's hard to deny that extending the retirement age is necessary, but a blanket application is the most burdensome approach for small businesses," an SME industry official said. "Manufacturers struggling to find workers want to keep their skilled tradespeople on; office-based companies want to rehire based on performance and job fit. There needs to be flexibility by industry and by role."

Meanwhile, the government has said it supports gradually raising the statutory retirement age from 60 to 65, but believes broad social consensus must first be built through dialogue, given significant disagreements between labor and management and the wide-ranging impact on the labor market. Within the ruling camp, a special committee on retirement-age extension is preparing draft legislation.