On using mandatory retirement to reduce workforce in Korea

Since the financial crisis in 1998, many Korean corporations with low profitability and excessive liabilities cut operating costs. They had to deal with exorbitant wage increases that outpaced productivity and were generated by the traditional seniority-based wage system. The empirical analysis of this study suggests that those companies with many long tenure workers under the Japanese-style personnel management system are more likely to utilize mandatory retirement in order to adjust employment. Moreover, blue-collar jobs are more likely to be associated with mandatory retirement. This suggests that the labour unions may tacitly approve of this practice.