This study analyzes how the introduction of the National Pension System in Korea will affect the country’s job market.
Included in the scope of analysis is how employers’ contributions will affect employee wages, and how the introduction of the National Pension System will affect the employment in age groups, that is, within the 18-59 age group, and men over 60 and women over 55 or who will be entitled to receive pension benefits.
The conclusions of this study can be summarized as follows: First, how much employers’ contributions to the pension scheme will affect employee wages. In the case of Category-1 participants, this will depend almost entirely on the elasticity of wage in the labor supply and demand function. Second, the ratio of how the total amount of contribution to be paid into the pension scheme that will be divided between employers and employees does not significantly affect how much of the employers’ contributions affect employees’ wages. Rather, the ratio of the amount of retirement benefits to be collected in the future to the average wage exerts a more significant impact. Third, the increasing burden on employers to make contributions to the National Pension scheme can raise the cost of labor, and thereby decrease the number of jobs available for workers in the 18-59 age group. The margin of decrease in the number of available jobs is directly related to the degree of wage elasticity in the labor demand function. Fourth, in the Korean manufacturing sector, the wages and benefits for employees form only approximately 10 percent of the production cost, according to the calculation of the expenses of a manufacturing business. Fifth, the National Pension System may serve to discourage people in their 60s and older from participating in the labor market. Sixth, workers under the age of 60 who work for 20 years or longer to meet the eligibility for collecting old-age pension benefits and who opt to retire early before reaching the age of 60 will benefit personally from joining the pension scheme. However, the increase in the number of such early retirees will serve to decrease the total amount of contributions into the pension scheme. Seventh, the extreme wage gaps among different groups of workers may hinder the integration of the pension systems in Korea.
The Korean government therefore needs to revisit the basic wage levels and employee benefits available for workers in different industries, and establish the concept of an average wage before introducing the pension system and determining the contributions that individuals are to make.
국민복지연금제도와 노동시장 파급효과(National pension system and its ripple effects on the job market
|Journal Title; Vol./Issue||한국개발연구:vol. 3(issue 4)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Social Development < Social Welfare|
|Holding||KDI; KDI School|