Over 9.5 million individuals born between 1964 and 1974 will reach the legal retirement age of 60 over the next 11 years. (Image courtesy of Korea Bizwire)
SEOUL, Jul. 3 (Korea Bizwire) – The Bank of Korea (BOK) has released a study highlighting the significant economic implications of the impending retirement of South Korea’s second generation of baby boomers.
The research suggests that as over 9.5 million individuals born between 1964 and 1974 reach the legal retirement age of 60 over the next 11 years, the country’s annual economic growth rate could decline by 0.38 percentage points.
The study, titled “Assessment of the Economic Impact of Second Baby Boomers Reaching Retirement Age,” reveals that this cohort, comprising 18.6% of the total population as of the end of 2023, is 35.3% larger than the first generation of baby boomers born between 1955 and 1963.
The BOK notes that the second generation of baby boomers has accumulated relatively higher human capital compared to their predecessors, with better education and higher pre-retirement incomes and assets.
In 2023, the average real income for households led by individuals in their 50s was 71.2 million won, 27.9% higher than that of 50-somethings a decade ago.
Using a Cobb-Douglas production function, the BOK estimated the economic impact under different scenarios.
If the employment rate for those in their 60s remains at the 2023 level, the annual economic growth rate is projected to decrease by 0.38 percentage points over the next 11 years.
However, if current employment growth trends continue due to government policies supporting re-employment, the decline could be limited to 0.24 percentage points.
In a more optimistic scenario, if South Korea were to implement strong institutional changes similar to Japan’s 2006 revision of its Elderly Employment Stability Law, potentially raising the employment rate for those in their 60s to Japanese levels, the annual growth rate would only fall by 0.16 percentage points.
Lee Jae-ho, a manager at the BOK’s survey and statistics department, emphasized the importance of creating conditions that allow second-generation baby boomers to utilize their accumulated human capital even after reaching retirement age.
He suggested that social consensus is needed on various measures to extend employment for older workers, such as mandatory re-employment of seniors, extending the legal retirement age, and introducing flexible job and wage systems.
The BOK also advised on the need to prepare for weakening domestic demand due to rapid population decline by activating consumption among second-generation baby boomers through asset liquidation and pension system improvements.
M. H. Lee (mhlee@koreabizwire.com)
