Full employment of most precious resources
The most valuable economic resources are human resources, and Korea needs to improve its use of its most precious assets.
A survey released last week reported that the average worker in Korea retires in his or her mid-50s. This is much earlier than their Western European OECD counterparts, who usually retire at 65 or older, and for whom even early retirement is usually 60 or older.
The survey results raised an issue that has puzzled me for a long time: Why do so many Korean workers retire in their mid-50s? This is true of many of my Korean friends, who had promising careers until they reached the age of 50.
A general management practice in Korea hints at an answer. A manager generally feels awkward supervising older staff. Employees also tend to feel demeaned if their supervisor is younger than they are. The general pattern goes all the way up the corporate ladder. A CEO’s executive team members often are younger than the CEO. When a new CEO takes office, the former executive team is usually replaced by staff younger than the new CEO.
In Korea, age matters.
This is in stark contrast to practices in America, where age is not such a serious factor. The U.S. president will become 50 in two months, while his vice president will become 70 next year. The U.S. president has several cabinet members who are a decade or two older than he is.
I know of a senior manager at a Dow-Jones Index company, the brand of which is an international household name, in her mid thirties. She supervises two dozens of professional male and female employees, all of whom are in their 40s or 50s.
In the U.S., these are not isolated cases. In my experience, American CEOs, whose median age is reportedly 55, often have a half of their executives older than they are.
In the U.S., performance matters, not age. Age discrimination is a serious legal violation together with discrimination based on race, sex, nationality, and religion.
A macroeconomic policy has three main goals: a stable economy, sustainable growth, and full and efficient employment of economic resources. Korea is fully committed to a stable economy. The Bank of Korea conspicuously displays a promise on its website, “The Bank of Korea Pursues Price Stability,” with additional displays of a specific inflation target and a base interest rate. Korea has laid down strong foundations for sustainable economy with high rates of domestic saving and ever-ballooning foreign reserves. When it comes to the last but the most important policy goal, however, Korea falls short, systematically wasting its most precious resources.
The contrasts between Korea and America have cultural roots. American society more or less accepts human equality and dignity regardless of age, talent, jobs, and social status. A job reflects someone’s personal preferences and talents, and is largely detached from human dignity or social status. Old Americans work for capable, young managers; young American workers fully exploit their talents with the assistance of older workers.
Korean culture generally discourages older but experienced workers from working under younger superiors, and young but capable people from leading a business with older workers. It’s a double whammy. In the former case, the expertise and wisdom of experienced workers are wasted after retirement in their fifties. In the latter case, young talents are held back from realizing their full potential until older workers are gone.
In this industrialized and knowledge-based age, the value of experienced workers is higher than in the less-industrialized ages when physical, muscle power was relatively more important. Physical strength deteriorates in middle age, but knowledge and expertise keep blossoming. Average Korean workers retire just before their talents and expertise reap a full harvest. What a waste!
A decade of additional work extends someone’s working life, contributing tremendously to national productivity and income. An extension of retirement age will also help alleviate the shrinking population problem.
By Daniel E. Suh
Daniel E. Suh is a professor of economics and finance, Graduate Program for Technology and Innovation Management, Pohang University of Science and Technology. ― Ed.