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KMID : 1124020150310040187
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Korean Social Security Studies
2015 Volume.31 No. 4 p.187 ~ p.225
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Comparative Study on the Wage Peak System and the Gradual Retirement System as Bridge System to Retirement for Old Employees
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Lee Jung-Woo
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Abstract
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This paper examines problems of the wage peak system which is currently being implemented and the possibility of introducing a gradual retirement system as an alternative. Research findings point out wage cuts as the critical problem of the wage peak system. Wage cuts can disrupt the relative price system of labor in the labor market, which could then distort competition and lead to various social conflicts. In particular, the wage peak system could place old employees in situations where they would, based on their price competitiveness derived from reduced salaries, compete with young employees for jobs. It indicates that the wage peak system could prove to be a model for competition and conflict between young and old generations, instead of a win-win model for both young and old as the government expects. As an alternative of the wage peak system, the gradual retirement system has the following advantages. First of all, the gradual retirement system, by reducing working hours for old employees, can provide an institutional environment which would benefit both young and old generations by allowing job opportunities to be shared. Also, while reduced workings hours under the gradual retirement system could have the effect of curtailing the supply of labor, it could prevent early retirement of old employees who are often pressed for time due to health or family issues, and thus increase the labor supply by mobilizing labor force in similar situations. Lastly, the gradual retirement system can serve as institutional infrastructure that can accommodate various working hours models. As a result, with the gradual retirement system, old employees can select a working hours model that suits them best, and thus extend their working life.
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KEYWORD
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wage peak system, gradual retirement system, seniority-based wage system, income supplementing system, bridge system to retirement
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