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Title: |
On using mandatory retirement to reduce workforce in korea |
| Author: |
Joonmo Cho and Sunwoong Kim |
| Author
Affiliation: |
Soongsil University, Dongjak-Gu, Seoul, Korea; University of Wisconsin - Milwaukee, Milwaukee, WI, USA |
| Source: |
International Economic Journal, June 2005, v. 19, no. 2, pp. 283-303 |
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Publication Date: |
June 2005 |
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Abstract: |
Since the financial crisis in 1998, the Korea corporations with low profitability and excessive liabilities were pressed to downsize their existing manpower. We argue that a common approach to the structural adjustment of workforce reduction has been to change the Japanese-type personnel management paradigm to the U.S.-type one, as a number of Korean companies had to deal with exorbitant wage increases outpacing productivity under the traditional seniority based wage system. The empirical analysis in this study find that the companies under the personnel backlog and labor cost pressure due to a high percentage of old aged workers were more likely to enforce the adopted mandatory retirement system as a means of employment adjustment. Additionally companies with mounting labor cost with long tenured workers under the seniority based salary system were more likely to use the mandatory retirement system. Lastly the more closed the internal labor market is, the more likely it is to employ the Japanese-style personnel management paradigm, and the more backlog there is in promotion, the more likely it is for the company to use the mandatory retirement system. In relation with labor unions, those of blue collar jobs were found to have heavier reliance on the mandatory retirement system as a means of adjusting employment. The empirical analysis of this study suggests that the companies with intense backlog in personnel management and labor cost pressure have utilized the mandatory retirement system to adjust employment and that the labor unions may have tacitly approved of this practice. |
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