Labor force ageing is considered a potential threat to the competitiveness of firms since it is expected to increase overall wage cost under the current seniority wage system. At the same time, however, there is evidence that the average tenure of employees has not changed despite the ageing of the labor force. In fact, once we remove the effect of changes in age composition, the average tenure of each age group actually turns out to have decreased over the last decade. This is partly because firms have been dealing with the ageing problem by laying-off the older workers and substituting them with irregular workers. Besides, seniority wage is especially higher in large firms, which leads them to avoid hiring older workers. As population ageing is expected to accelerate further, this will lead to more job insecurity, which has already reached an undesirable level. To avoid this situation, policy measures, such as job sharing through reduction of work hours and flexible working, have to be more vigorously implemented.

Jang Insong