Association for Public Policy Analysis & Management

Labor force participation of older males in South Korea is higher than other OECD countries, with the effective labor market exit age ranking the highest. Elderly poverty rate is also high, indicating the possibility that older adults in Korea need to work more for economic stability. Korea’s largest social security system for the aged – The National Pension Scheme (NPS) – was created in 1988 and achieved universal coverage in 1999. However, Korean seniors do not seem to retire around the official retirement age of 60, implying that pension benefits from the government may be insufficient for later life. Using five waves (2006-2014) of the Korean Longitudinal Study of Ageing (KLoSA), this study examines the impact of social security benefits on retirement decisions for older adults living in South Korea. The methodology used in this paper is a widely used model in retirement studies, which have been applied to various other countries, yet to South Korea. The unique labor market characteristics of Korea – late retirement, high rate of self-employed, high rate of elderly poverty – will provide valuable insights to other countries experiencing population aging. The regression analysis shows that social security benefits received from the NPS do not play a big role in retirement decisions of the elderly. Also, the incentives for retirement built into the national pension system do not seem to contribute much to early retirement or even retirement around the eligible age of 60, especially for the self-employed. This is in contrast with the experience in many advanced countries where government pension programs have been the underlying force behind the decline in labor force participation of the older population. With the increasing life expectancy, Korean seniors might find pension benefits from the government to be insufficient for later life.