Working Better with Age: Korea by OECD

Author:OECD
Language: eng
Format: epub
Tags: socialissues/employment
Publisher: OECD Publishing
Published: 2018-10-23T16:00:00+00:00

Employment incentives

Employment subsidies will also help older workers and jobseekers to access the labour market. Such subsidies can be useful in two forms: Incentives to retain workers in their main job and incentives to help jobseekers into new jobs of decent quality. Remaining longer in the main job is the most effective way to keep the quality of employment high. The main policy tool encouraging employers in Korea to retain their older workers longer is the subsidy for the wage peak system, introduced in 2006 and given to employees who accept a wage cut which is partially compensated. In view of the gradual increase in the age of mandatory retirement, the wage peak system should be introduced by firms more widely. Trade unions also need to cooperate on introducing the system to improve employment prospects. Otherwise, firms facing a loss in competitiveness would be prompted to continue pushing out older workers before the mandatory retirement age.

The most important hiring subsidy for older jobseekers in Korea is the Internship Programme of the Middle and Older-aged, introduced in 2013, which provides internship opportunities for unemployed people aged 50 and over to connect to regular jobs. Firms that hire an eligible worker can receive a subsidy equal to 50% of the wage paid (up to KRW 800 000 per month) during an internship period of three months. After this period, KRW 650 000 per month can be paid for another six months if the employer offers a regular job to the intern. Take-up of the scheme, however, is low: In 2014, 7 734 older workers had been hired as interns and 4 795 of them had then been converted to regular workers. More can be done to promote the scheme, especially also among smaller companies. Changes could include: i) reducing red tape to make it easier for companies to apply for the subsidy; ii) making the subsidy more flexible in time as the six-month period may be too short for employers to consider applying for it; and iii) integrating the hiring subsidy with targeted training schemes to improve the employability of eligible jobseekers to make them more attractive for potential employers.

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