Tackling Involuntary Retirement in South Korea

Participants at an early orientation session for the Good Job 5060 program, a corporate social responsibility initiative in South Korea. (Image courtesy of the Good Job 5060 program)

The number of retired people in their late 50s and early 60s is growing fast in South Korea. In 2010, 24 percent, or 1.7 million people between the ages of 58 and 66 retired, compared to 33 percent, or 2.4 million people, in 2019. But while early retirement may seem enviable to some, it presents a big problem for others: Retirement for South Koreans in this age group is rarely voluntary, and many are not financially prepared to leave their jobs. In fact, almost 60 percent of retirees hope for reemployment after leaving their former workplace due to economic concerns.

Unfortunately, only a fraction of all retirees aged 55-64—about 26 percent—succeed in reemployment, and those who do find new jobs tend to work in low-paying ones. About 80 percent of people who succeeded in finding new work in 2018 engaged in labor jobs such as janitorial, caretaking, and building security services, and, as of 2018, their average monthly wage ranged between $1,000 and $1,600—significantly lower than the median income.

This situation often leads directly to poverty. People usually start receiving a pension at age 60, but the average retirement age in South Korea is 49. According to a 2019 survey, 76 percent of the early retirement was nonvoluntary and 41 percent of early retirees said they were not prepared. Many people therefore face a decade without sufficient income, forcing them to use up all their savings and assets even before reaching old age. Indeed, South Korea’s elderly population has the highest poverty rate among the Organization for Economic Cooperation and Development (OECD) member countries.

It also means that valuable professional knowledge and experience accumulated by this group—which could particularly benefit small- and medium-sized enterprises (SMEs)—gets wasted. Despite the fact that many senior people desire to continue working and that many businesses are willing to employ them, an inefficient labor market with information asymmetry prevents them from contributing to businesses, and from receiving the financial and psychological rewards that come with it.

An ‘Adaptive Problem’

An employment system that effectively matches capable, middle-aged workers with businesses that need their expertise is essential to solving these issues. Yet past efforts to create a working system have failed to effectively coordinate the array of organizations necessary for their success. Consider: While the government can identify middle-aged people seeking reemployment, it does not have the skill or capacity to develop and operate job-training programs. It therefore needs the support of nonprofit organizations and social enterprises that specialize in operating reemployment training programs. At the same time, nonprofits and social enterprises need to engage with employers so that they can develop appropriate curricula, and understand how to connect applicants to interviews and on-the-job training.

In their 2004 Stanford Social Innovation Review article, “Leading Boldly,” Ronald Heifetz, John Kania, and Mark Kramer defined a “technical problem” as a well-defined social problem that has a known solution, and that one or a few players can solve independently through an isolated initiative. They defined an “adaptive problem” as one that involves many different organizations with different perspectives, and that requires those organizations to create and implement a new solution as a collective. In this sense, creating an effective job-matching system is an adaptive problem; no single institution has the resources or authority to solve it alone. Even if job applicants have access to effective reemployment training programs, they won’t have sufficient opportunities for sustained employment without the collaboration of potential employers. On the other hand, even if companies agree to collaborate, they will be reluctant to hire applicants if the reemployment training is costly or inadequate.

A Combined Approach

So how can governments, nonprofits, and businesses—each with different needs, competencies, and resources—work together to create an effective matching system that benefits all? One promising effort is a corporate social responsibility initiative called the Good Job 5060 program (GJ5060). Launched in 2018, it aims to train 1,000 middle-aged people and help half of them get reemployed. The uniquely cross-sector effort is led by Hyundai Motor Group (HMG), which committed to supporting the program through 2022, in partnership with Seoul City 50 Plus Foundation, the Korean Ministry of Employment and Labor, and the social enterprise Sangsang Woori.

HMG began the process by using a business ecosystem approach, which is based on the idea that companies in an interdependent system should work together to create a seamless value chain that satisfies the needs of target customers. As a first step, it mapped the “customer experience journey” of its target beneficiaries (middle-aged people searching for reemployment) and identified a range of pain points, including:

• Recruitment and training were time-consuming and expensive for companies.
• Middle-aged people had little money to pay for training after retirement.
• Middle-aged people found it time-consuming and difficult to directly contact companies for job search.
• Reemployment training curricula and applicant expectations did not align well with businesses’ (particularly SMEs’) needs.

This process made it clear that HMG could not solve the problem alone; it simply was not feasible for the company to design and implement all necessary operations, including retraining sessions, job matching, and corporate interview arrangements. So it began identifying partners within the employment ecosystem that had the capacity and knowledge to address each pain point. In the months that followed, the Seoul 50 Plus Foundation took on advertising, recruitment, and applicant selection. The Ministry of Employment and Labor committed to providing aid through policy support and engaging with potential employers. And Sangsang Woori began developing and operating reemployment training programs, and offering employment support services for middle-aged people. Importantly, the initiative also sought to include companies looking to recruit qualified middle-aged individuals, in order to get ideas and feedback on training programs, and increase the chance of getting job interviews and/or on-the-job training programs for applicants.

The clear and complementary allocation of roles and responsibilities among partners within the employment ecosystem set the stage for working under a second approach: collective impact, or the commitment of a group of organizations from different sectors to a common agenda for solving a specific social problem. Since the business ecosystem approach clearly defined beneficiaries’ pain points, there were few disagreements about the common goal or agenda. In addition, the measurement system for achieving the goal was relatively easy to share, because the program had a clear purpose of matching decent jobs to middle-aged people. Thus, Good Job 5060 could meet the five conditions of collective impact success:

1. A common agenda: The program is based on a common vision and mission of creating and matching decent reemployment jobs for middle-aged people. It aims to train 1,000 retired people and help reemploy half of them by 2022.
2. Shared measurement systems: All partners agree to measure the number of people reemployed after the program, annual salaries, and employment duration. Partners also commission an independent, professional firm to collect, organize, and analyze data for measuring and reporting impact. The firm can access data freely, and conduct surveys and interviews with program participants.
3. Mutually reinforcing activities: The program creates synergy by highlighting the different strengths of each partner organization and mobilizing diverse resources. The clear division of roles and responsibilities helps partners use limited resources and achieve goals efficiently and effectively.
4. Continuous, open communication: Business managers from HMG, Seoul 50 Plus Foundation, and Sangsang Woori convene weekly check-in meetings to share information. They also actively seek feedback from potential employers, which increases the success rate of re-employment for middle-aged people by developing and refining a training curriculum that reflects the needs of employment partners.
5. Backbone support organization: Sangsang Woori plays the role of the backbone organization, coordinating activities and resources. It has two full-time staff supporting the Good Job 5060 program. One directs the coordination and communication of the program; the other finds and manages businesses, and matches them to middle-aged people.

The Power of Partnership

So far, Good Job 5060 has provided reemployment training and employment support to 414 participants, and nearly 65 percent (268 participants) have succeeded in finding reemployment. This figure greatly exceeds the 30- to 40-percent reemployment rates of previous, public agency-led programs for this group. The recruitment satisfaction of companies that hired these individuals has also been high at 85 percent, and as companies have figured out how to fully use their competencies, employees have been able to earn a reasonable average wage of $2,400 a month.

According to the Good Job 5060 Impact Measurement Study we conducted, the monetized social impact (which accounts for the social value of free job training, job-matching services, and increased income) Good Job 5060 created between 2018 and 2020 was about $4 million. In addition, its social return on investment was computed as 4.7, which implies that every 100 dollars spent on this program could generate a social value of $470 for the society. The study highlights three important factors that have contributed to Good Job 5060’s success: incentivizing potential employers, establishing a hiring intermediary, and aligning skills and expectations.

1. Incentivizing potential employers. One of the main reasons for the success of Good Job 5060 is that it engages potential employers as partners early on. The idea of creating quality reemployment jobs through collaboration with companies is not new, but companies often have little reason to actively participate; they can recruit and select suitable applicants without external partnerships. Good Job 5060, however, provides incentives to potential employers by identifying their needs and reflecting them in the program design. For example, the Seoul 50 Plus Foundation handles job advertising and recruitment, reducing company costs. Applicants who complete the program can also immediately start work without further training, which also curbs company expenses. According to the study, business recruitment and training savings over the past 3 years amounted to about $2.5 million.

2. Establishing a hiring intermediary. Another reason for the program’s success is that participants do not need to directly contact potential employers after completing the reemployment training; instead, Sangsang Woori steps in as a hiring partner and connects them with on-the-job training programs and/or job interviews. In fact, 53 percent of middle-aged people who completed the Good Job 5060 program have gotten their jobs through Sangsang Woori’s intermediary service.

3. Aligning skills and expectations. Finally, Sangsang Woori designed its training curricula and content based on feedback from the employment partners, mostly SMEs. This has not only aligned employee skillsets with company needs but also improved retention of potential employers. That’s because, while most program participants have valuable work experience at major Korean companies (such as Hyundai Motors and Samsung) or companies in the financial sector, they often fail to consider the relatively limited resources of smaller businesses. As a result, they often devise unreasonable plans, complain about the budget, or even abruptly leave after a few months. Accordingly, many SMEs tend to see experienced participants as a liability.

To solve this problem, Sangsang Woori familiarizes participants with these situations during training and provides opportunities for them to meet with existing employees so that they can develop a realistic expectation of the working conditions. This means they are better equipped to adapt to the SME environment and achieve good results through cooperation with team members. The businesses meanwhile benefit from reduced risk of turnover.

It is worth highlighting that if one partner were missing or not functioning properly, the collective effort would produce only limited outcomes. Instead, partners actively adopt the kind of mutually reinforcing activities, share measured outcomes, and engage in open communication to achieve common goals. In so doing, they leverage the business ecosystem approach to identify the pain points of target stakeholders and design solutions accordingly.

Of course, while Good Job 5060 is producing meaningful results, the effort remains relatively small in scope. To increase its impact, it is expanding its recruiting boundary from Seoul to the entire nation. Nearly 31 percent of South Korea's population is expected to reach ages 50 to 69 in 2035. Establishing an effective, large-scale reemployment system for middle-aged people now will enable them to continue to earn and prepare for later stages of life. Businesses can also benefit from the group's more substantial purchasing power, and use their skills and labor to increase productivity. Good Job 5060 offers a proven working model that governments, nonprofits, and businesses can use to decrease late-life poverty and put valuable professional knowledge to use.

Read more stories by Hoyoung Lee, Haeun Kim & Hyun Shin.