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Sustainable Management and Future of Human Resource Management

Prof. Dr. Seong Kook Kim (School of Management, Ewha Womans University, Seoul, Korea)

1. Sustainable Management Attention to sustainable management has been growing in global business area in recent years as the global society experiences harmful effects of massive consumption of resources. In definition, sustainable management creates the ability to keep a system running indefinitely without depleting resources, but maintaining economic viability and nourishing the needs of the present and future generations. From this definition, sustainable management has been created to be defined as the application of sustainable practices in the categories of businesses, society, environment, and personal life by managing them in a way that will benefit current generations and future generations. Sustainable management is needed because it is an important part of the ability to successfully maintain the quality of life on our planet. Sustainable management can be applied to all aspects of our lives. For example, the practices of a business should be sustainable if they wish to stay in businesses, because if the business is unsustainable, then by the definition of sustainability they will cease to be able to be in competition. Global financial crisis, started from U.S. subprime mortgage issue, made companies to acknowledge the importance of sustainable growth, and companies has begun to think how to apply the concept to their business practices. While the practices were only limited to Corporate Social Responsibility activities in the past, it is now extended to strategic management area to develop new business opportunities or profit making models. This new management trend shows that a company does consider sustainable management not only as a way to improve its brand reputation but also as a direction to build its corporate strategy and core competencies. This new trend is noticed in global business practices. For example, International Standard Organization (ISO) developed ISO 26000 to regulate overall social responsibilities on environment, human rights, labor management, and etc. As ISO 26000 becomes a global business standard, it can be disadvantageous to companies that do not follow the guideline and indirect trade barriers. Organizations need to face the fact that the boundaries of accountabilities are expanding and moving fast. It is imperative for a company to consider not only shareholders’ profit but also stakeholders’ interest, such as social and environmental (or ecological) responsibilities to succeed in long-term. With the consensus on the

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importance of sustainable management, there has been a research on developing a framework to integrate sustainable management requirements into traditional management agenda. Triple Bottom Line (TBL) has emerged as one of the best integrated frameworks, to which a company can refer in building their short-term and long-term strategy. The TBL captures an expanded spectrum of values and criteria for measuring organizational success: 1) economic, 2) ecological and 3) social. The TBL is also known as “people, planet, and profit” or “the three pillars.” In practical terms, Triple Bottom Line means expanding the traditional management framework to take into account ecological and social performance in addition to financial performance. Here are some of the best practices listed for your reference: - Philips: “Green Flagship”: Green Flagship products provide concrete example of how Philips improves the quality of life and tackles the issues – such as global warming – that resonate with consumers worldwide. Green Flagship products must be proven to offer substantial better environmental performance than their predecessors or closest commercial competitors on energy consumption, packaging hazardous substances, weight, recycling and disposal and lifetime reliability. These products now account for an turnover of 2 billion Euros, double that of 2004. - GE: “Ecomagination” Ecomagination contributed to cost reduction and sales increase by launching “Lighting Efficiency Retrofits”projects. “Powering Your Home is one of the GE Ecomagination Challenges, part of GE’s &200 million commitment to finding and funding the most promising technologies for our energy future. The “Powering Your Home” program contributes to dramatical improvement of creation, management and use of energy in the home. - BP: “Wildlife Rescue and Rehabilitation” BP worked with nationally-recognized wildlife groups to develop specific rescue and rehabilitation programs for nesting turtles, migratory shore birds and other species. Experts from NOAA, the US Fish and Wildlife Service, the National Park Service, as well as state agencies, helped BP to identify the most sensitive wildlife habitats and prioritize appropriate spill countermeasures. These measures included booming wildlife refuges, state wildlife management areas and rookeries along the coast, as well as using methods to deter wildlife from entering oiled areas. Within days of the accident, BP established a hotline for the public to be able to report sightings of impacted wildlife. Throughout the response, wildlife rescue and rehabilitation teams worked closely with oil removal and operations teams to prevent and minimize oil reaching sensitive wildlife areas.

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2. Sustainable Human Resource Management Human resource management (HRM) is a big part of sustainable management in general. For example, cooperative labor union relations management, global talent management, corporate and community welfare are core themes of sustainable management, and it is closely linked to human resource management. In this context, sustainable human resource management is playing critical roles in sustainable management(see Figure 1). In general, sustainable human resource management is defined as strategies and activities to achieve a company’s balanced objectives of social accountabilities and economic profits through acquiring, developing, and attaining human resource. The perspectives on the subject can be different from an employer and an employee. While an employer focuses on accomplishing sustainable profits and meeting social responsibilities, an employee is more interested in individual responsibilities,

<Figure 1> The Relationship between Sustainable Management and Sustainable HRM

Economic Profits!

Ecological Soundness!

Social Responsibility!

Sustainable Management (TBL Model)!

Employee Perspective!

• Work and Life Balance!

• Higher Marketability !

• Expanded Responsibilities !

Employer Perspective!

Competitiveness of

the Organization!

Sustainable Human Resource Management!

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motivation, and continuous development to accomplish both personal and organizational goals. Considering the different interests, close collaboration between an employer and an employee is required.

There are diverse perspectives on sustainable human resource management among academic researchers. No one universal consensus exists on the key subjects yet. However, there was a meaningful research to develop the list of key subjects in the area. The empirical research was funded by the Swiss Confederation and conducted by (IOP) members in University of Bern in 2001. Around 1,000 organizations across 8 countries participated in the study. 300 key words under 20 categories on sustainable human resource management were surveyed.

In Figure 2, core key words that came frequently from the survey are listed.

The most frequently stated concept by participants was human resource development. Here, human resource development covers training and development, re-training, license and certification, and career development. Employee characteristics are ranked as the secondly important concept. This includes the concepts of employee motivation, flexibility, reliability and volunteerism for performance. This research displayed huge influence on following researches, and scholars have developed key subjects and components as listed below.

- Employee wellness program

- Work-life balance: Flexible working hours Job-sharing Sabbaticals Teleworking - Human resource development Promoting employee motivation Increasing employee responsibility Expanding training opportunities - Leadership and coaching Participatory Leadership Management by objectives Communication among employers and employees 3. Future of Human Resource Management

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Sustainable human resource management is like a two-sided coin. In employee aspect, key components of sustainability are 1) higher opportunity for employment, 2) larger individual responsibilities, and 3) work and life balance. However, from employer stance, the competitiveness of the organization comes first (Figure 2). To address both parties interest, collaboration between management and employees should go along with sustainable human resource management system. Studies on this topic are still at early stage. Even though there is awareness of the importance of sustainability, there are few real business cases of sustainable human resource management. Given the time required to prepare for it, it will be too late for companies to start related initiatives when they need to implement. To achieve long term sustainability and mitigate future risk, it is the right time to design and start sustainable human resource strategy and initiatives.

According to German scholar Norbert Thom’s theory (2001), sustainable HRM can be achieved through close collaboration between an individual and an organization. To maintain sustainability as an individual, one should 1) focus on self-development to increase one’s marketability in the labor market, 2) provide the best efforts to the organization in line with one’s responsibilities and 3) make a work-life balance (see Figure 3). As an individual strives for sustainability, a business organization should build sustainable HRM practices to support its employees to be adjusted into organizational culture, values, goal and strategy. Sustainable HRM is an ideal management practice for both employees and employers, and it contributes to the future of HRM in a positive way. Here are some of the best practices of corporate sustainable HRM in Korea:

The Hankyoreh Economic Research Institute, an affiliate of The Hankyoreh, analyzed the “sustainability reports 2007” of 22 South Korean companies to estimate how transparent they have been in disclosing their business achievements in diverse categories. The areas include the economy, the environment, labor, human rights, society and consumer protection...Yuhan-Kimberly (joint venture Yuhan & Kimberly-Clark) scored an average 57 points on a scale of 100, ranking first among those surveyed. Korea South-East Power came in second...followed by POSCO and Daewoo Securities...Samsung SDI and Korea Electric Power Corp. were next...Along with the top six companies, Samsung Electronics, KT, Samsung Electro-Mechanics, Korea Water Resources Corp. and Korea Midland Power received higher-than-average scores, while SK Telecom, Korea Land Corp., LG Electronics, Lotte Shopping, Korean Air [part of Hanjin Group], Hyundai Motor Company, GS Caltex, Shinhan Bank, Kumho Asiana Group and Woongjin Coway were among those which received lower-than-expected scores.

Yuhan-Kimberly Model (4-Day Shifts): Workers at Yuhan-Kimberly, Korea’s No. 1 maker of diapers and toilet tissues, take the time to ensure that the company’s products are free from the most minor defect. An assembly line worker at Yuhan-Kimberly typically works 12 hours for four days and takes the next four days off. That’s unusual here, where many people still put in 50 or

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60 hours a week and have only one day a week to rest. Not only that, but after their four days of rest, the employees then work night shifts for four days in a row, 12 hours each night. After another four days of rest, they work four day-shifts again. Their schedule continues to alternate in this way, an arrangement which allows Yuhan-Kimberly to keep its expensive production machinery operating 24 hours a day. Though unorthodox, there is no denying the four day scheme has produced solid returns. Employee satisfaction is high and increased productivity has led to a 17-fold leap in net profit over the past 13 years. In addition, the system has contributed to job creation. Over that period, the consumer goods company has increased its workforce by 30 percent. Yuhan-Kimberly also enjoys the top market share in eight product categories. Its product list includes "Huggies," Korean mothers’ most favored diaper brand. While companies worldwide have adopted a policy of having "reserve" workers, particularly in sectors where safety is a concern, the so-called Y-K model is original because of its emphasis on education.

On one of the four days they are off, Yuhan-Kimberly workers attend a study session at work. It’s voluntary, but about 80 percent of the assembly workers participate. Those who attend also get paid 150 percent their regular day rate. A large portion of the classes is devoted to keeping employees well versed with the machines and tools they use. Despite the company’s phenomenal success, most Korean corporations still believe that cutting the workforce - not bolstering it - is the first step to restructuring. But given Yuhan-Kimberly’s reputation as Korea’s most ethical company, many companies are willing to give the Y-K model a second thought. The company has been flooded with inquiries from corporations nationwide that want to learn the secret of the company’s success.

<Figure 2> Core Issues on Sustainable HRM (Results of the Survey) Source: Swiss University of Bern (2001)

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<Figure 3> Thom’s Model for Sustainable HRM Source: Norbert Thom (2003)

Organizational Culture & Values!

Instruments, !Methods, !Process, !Structure!

Goal & Strategy !

Individual !

Marketability ! Responsibility !

Work-Life Balance!

1

The Age Management and Wage Peak System

of Korean Firms

So-Yeong Kwon

(School of Management, Ewha Womans University)

Ⅰ . Introduction

Korea has entered into an aging society and its aging rate has been

increasing at an exceptionally high speed. It results from the longer average life span

and low birth rate. UN has categorized aging society into three base of the proportion

over 65 years old against its whole population. 7 percent is categorized as an aging

society, 14 percent is an aged society and 20 percent is a super-aged society.

There are differences of population aging between countries, but it is still obvious

that they will have a common problem in the near future.

<Table 1> Comparison of Aged Population Rate in Major Countries.

Population ratio of over 65 years old country

Entry of 7% Entry of 14%

Time spent from

7% to 14%

Japan 1970 1994 24

U.S.A 1945 2014(E) 69

UK 1929 1976 47

France 1864 1979 115

West Germany 1930 1972 42

Sweden 1887 1972 85

Korea 2000 2018(expected) 18

Source: KCCI(The Korea Chamber of Commerce & Industry). 2003

As shown in the table 1, Korea faced faster growing aging society compared to other

countries and it seems entry to aging society will be faster than we expected.

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According to 2011 Korea censuses, 5,420,000 people is over 65 years old

and it makes 11.3 percent out of the whole population. The number obviously

showed that Korea is entering into an aged society. Aging society leads to aging

workforce. It is expected to reach 40 percent of total Korean workforce is over 50

years old by 2020 and 50 percent by 2050 (Hanam Bang et al. 2005).

<Table 2> Change of Internal Employee Age

Source: Korean Ministry of Employment and Labor, 2009

Aging society and the workforce require some major changes in Korean firm’s

human resource management system. Increased number of older workers gives

bigger labor cost burden to Korean firms due to their seniority based pay system.

Thus many Korean firms have been trying to control labor costs through encouraging

various types of early retirement programs.

To cope with aging workforce issue, three options are generally considered in

Korean enterprises: 1) restructuring of an organization (i.e. early retirement program

or lay-off), 2) performance-based compensation system, and 3) wage peak system.

While the restructuring and the performance-based compensation system drive

immediate cost reduction impact, they can harm the company’s long-term success

by decreasing employees’ loyalty toward the company and moral.

Companies need to prepare more realistic solutions for aging workforce.

Adopting flexible retirement program, which allows workforce changes one’s roles

and work hours in line with one’s life stage changes, can be a good realistic solution

Year Average age 2009 38.5

2008 38 2007 37.8 2006 37.5 2005 37.7 2004 37.5 2003 37.1 2002 36.5 2001 36.5 2000 36.2 1999 35.9

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for the company. One option for flexible retirement program is Gradual retirement

program.

Another option can be providing Second career program that helps employees

prepare life after retirement in advance. Company can provide profound second

career consulting for employees in their late thirty.

Third option can be re-hiring process which is hiring experienced retirees back

and transferring their knowledge to younger generation workforce. Last option we

can consider is Wage peak system. Wage peak system is the most popular program

in Korea to mitigate aging workforce issue.

Ⅱ . Wage Peak System in Korea

1. Definition of Wage Peak System

Wage peak system is defined as providing guaranteed job security to

employees with a reduced wage after a certain age. But there has not yet been a

strong consensus among stakeholders of Korean firms on introducing wage peak

system as one of the major tools for human resource management.

Wage peak system can be explained by Lazear’s Agency theory. Seniority

based system which is the base of Wage peak system pays young workers lower

wage than their productivity, but pays more when they reaches middle, old-age

according to their age and years of service.

However, Lazear pointed that companies cannot take the salary burden as

the payment become bigger than the productivity. Lazear argued that it is more

reasonable to decide retirement time when the portion of lower salary than the

productivity (A) becomes equal to the portion of higher salary than the productivity

(B).

Productivi

ty

wage

4

Wage peak system is a compensation scheme in which employee’s payment

is adjusted according to the level of stabilization of employment (retirement-security

model or retirement- extension model).

In Korea, a similar policy has been operated, as an alternative for early

retirement for middle-aged and elderly employees with high payment demands

primarily by financial institutions, such as a policy of ‘work sharing’, since IMF crisis

and wage peak officially has been applied by KODIT (Korea Credit Guarantee Fund),

in July 2003.

The policy has recently been revived as a buffer for employment conflicts

among the baby-boomers (seven million and twelve thousand people from 1955,

right after the Korean War, to 1963). According to KCCI(The Korea Chamber of

Commerce and Industry), the implementation rate of the wage peak system has

been increasing from 3.3 percent (2006), 4.4 percent (2007) to 11.2 percent (2010).

Yet, percentage of adoption of wage peak system is not high (11.2%). The KCCI-

Surveys represent that the adopting the wage peak system by Korean companies

has increased every year since 2005.

<Table 3> Adoption rate of wage peak system

AB

Age

Retiremen

t

Entry level

A : Productivity> wage

B : Productivity< wage

ProductivityWage

5

!

Source: KCCI, 2010.

!

!The employees expressed 71.4 percent of favor on wage peak system based

on KCCI survey. Those firms that are adopting wage peak system experienced

positive effects such as greater employment security and reduced labor cost.

2. The Effects of Wage Peak System

First, the policy increases job security for middle-aged and elderly employees

and renders less layoff for firms by adjusting payments according to reduced

productivity.

Second, firms can keep skillful human resources with lower cost which can

create new jobs.

Third, the mental and economic well-being of middle-aged and elderly

employees expects be increased, as they can meet their desire to work and have

economically stable life in relatively longer period.

Forth and finally, the policy can solve the issue of a shortage of economically

valuable workers, reduce youth unemployment, and mitigate costs of social security.

3. Types of Wage Peak System in Korea

Wage peak system operated in Korea is divided into two models: retirement-

security model and employment-security model. The former adjusts wages after a

certain age is reached to ensure the retirement age established by collective

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agreement or by employment rules. The latter adjust wages instead of extending

employment after retirement and sub-categorizes into retirement-extension model

and employment-extension model.

Retirement-extension model adjusts the wage level for extended retirement age

or an extended period of retirement, based on the precondition of extending

companies’ current retirement age. Employment-extension model refers to a system

in which an employee retires and is extended of the employment as a temporary

worker.

The report of KLI (Korea Labor Institute) in 2008 says that among the

companies surveyed, 105 companies introduced wage peak system, in which 31

brought in retirement-security model, 52 retirement-extension, and 22 employment-

extension, demonstrating the higher proportion of retirement-security model than the

others.

<Figure 1> Three models for wage peak system in Korea (Company Survey)

Source: Korea Labor Institute (2008).

The KLI reports showed that the policy has been introduced mostly in the

manufacturing sector in Korea. So far, larger firms with closer cooperation with

labor unions are more readily accepting such policy.

As for the purpose of the introduction of wage peak system, 59.4 percent of

respondents said for easing the burden of labor costs, 50 percent for utilizing the

experiences and know-hows of elderly employees, 35.4 percent for relieving middle-

aged and elderly employees’ concern on job insecurity, 22.6 percent for boosting

employees’ morale, 18.6 percent for tackling a personnel congestion, and 18.4

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percent for an alternative for restructuring. For retirement-security, easing the burden

of labor costs occupies the highest proportion while employment-extension utilizing

the experiences and know-hows of elderly employees, indicating the differential

objectives for different types of the system.

4. Cases of Korean Companies

A. LG Electronics

- Overview : Foundation in 1958, A global leader of technological

innovation worldwide with more than 120 businesses and 93,000

employees electronic, mobile communication & home appliances.

- Wage peak system background : In 2007, adopted wage peak system to

secure employment stabilization and competitiveness by using high-

quality workers(retirement- extension model).

- Wage peak system characteristic : retirement extension(55 ! 58),

calculate severance pay at the age of 55 and 10% of wage cut down

every year. Rehire competent workers age of more than 58

!

B. POSCO

- Overview : Korea’s the most representative steel company found in 1968.

POSCO became the world’s top steel company in 1998, and privatized in

2000.

- Wage peak system background : : Initiated wage peak system in Jan.

2011. Current average age of workers is 47. Percentage of workers more

than 53 years old will reach 30% in 2015.

- Wage peak system characteristic : Extended retirement age from 56 to

58(retirement-extension model). Wage freezes form 52 to retirement.

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C. KT(Korea Telecom)

- Overview : Foundation in 1981. Privatized form government in 2001.

The largest information and communications service company in Korea.

- Policy for Aged- workers : NO wage peak system, but retirement age is

58 and provide re-entry and business start-up assistance program.

D. KOLON INDUSTRIES

- Overview : Found in 1957, leading company of industrial, electronic

materials and fashion business.

- Policy for Aged- workers: Deferred retirement and wage peak system is

under consideration based labor union request. Retirement age is 56, but

after specialized jobs Tech, Elec, Machine, Environment relate to can be

extended after 56.

Ⅲ . Conclusion

In case of Korea, aging has not been perceived as a critical issue yet both in

the enterprise and in the government. However, the speedy transformation of Korean

society into an aged society requires special attention from the government,

company owners and from the unions. Wage peak system should be introduced to

guarantee income for a secure and healthy elderly life.

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The biggest challenge of spreading wage peak system is that there is no clear

success stories both in company and employee side yet. From the firm’s perspective,

they should focus on developing a process that can transfer experience of old skillful

resource into company productivity increase. With the knowledge transfer process in

place, companies see the direct business impact from keeping old experienced

employees with wage peak system and it will make them more aggressive on its

implementation. At government level, it is required to increase aids for companies

and parties involved and to promote good examples of the system to dispel prejudice

toward middle-aged and elderly employees and create atmosphere conducive to

employment extension.

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The Gradual Retirement Plan as an Age-Friendly Model for the Korean Economy

So-Ra Min

(School of Management, Ewha Womans University)

Ⅰ . Introduction

Modern society is facing various problems due to longer longevity

owing to the advancement of the medical science and quality of life. South

Korea has already entered ‘aging society’ since 7.2% of the national

population was aged over 65 in 2000. ‘Aging society’ is defined as the

society in which the proportion of population over 65 reaches 7% conceptually.

The society is called ‘aged society’ when it exceeds 14%, ‘super-aged society’

when it exceeds 20%. South Korea’s ‘aged population’ has already reached

10%. Considering the rate of increase, Korea is expected to have 14.4% of

population over 65 in 2018. In addition, extremely low birth rate, which was

1.08 in 2005, accelerates the transition to ‘aged society.’ Only 19 years will

take for Korea to become ‘aged society,’ and another 9 years will be needed

to become ‘super-aged society’. This would be an unprecedentedly fast

changing rate in the modern history. For France, for example, it took 115

years, 85 years for Sweden, and 24 years for Japan from an aging to an

aged society.

The benefit of aging population is the lengthening individual’s life span.

The disadvantage it is having more aged working population and decreasing

of productivity. To cope with the problem of rapid aging population, Korean

society and economy need to be adjusted accordingly. More attention must

be paid to older employees and their careers in the workplace. Benefits of

healthcare and insurance should be provided for senior citizens. Older

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workforce could have been offered opportunities for economic activities in

spite of retirement. Along with that, extended hiring of the aged generation

would ease the lack of labor in the aged society and devoting to financial

clearance of the social welfare system including public pension.

For that reason, the gradual retirement has been an emerging issue in

the field of employment stability and extension. To address aging workforce

issue, a wage peak program has also been discussed. However, it couldn’t

be expanded to wider industries due to relatively long implantation time and

limited government support to smaller-sized companies. In addition, the wage

peak system is not the fundamental solution but a temporary expedient. With

growing political attention to aging workforce, Korean government is

researching on the adequate options and setting relevant policies. For

instance, the government is considering an institutionalization of labor aged

over 50 to shorten the working hours with financial support from the

government. To contribute the research, I focused on the gradual retirement

program in the advanced countries such as Germany and Japan. The case

studies provide key insights for Korean government to select effective gradual

retirement program implementation strategy for Korea.

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<Figure 1> Demographical Development of South Korea

Ⅱ . Gradual Retirement Plan in Germany

The discussion for the needs of gradual retirement has started in the

end of 1970s in Germany and it has been highlighted through ADVANCED-

AGE-STUDY in 1980s. In 1990s the study focus was shifted to utilize gradual

retirement as a possible solution for financial instability of the national pension.

The trait of German gradual retirement system is the dual modules

made of a combination of employment insurance and national pension. The

reason for having this unique model is to divide the budget systematically by

its goal and function. In terms of employment insurance, the gradual

retirement is used under the name of partial early retirement systems which is

replacing existing early retirement system. Employment insurance can support

senior citizen’s job security while it reduces insurance costs due to large

scale of early retirement. From national pension side, the gradual retirement

is utilized as partial pension program which is replacing early retirement old-

age pension program. These two modules has different age guidelines for its

application and making it possible to cover around 10 years of gradual

retirement program.

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Ⅲ . Gradual Retirement Plan in Japan

The continued employment benefits for the aged(高年齢雇用継続給付金)

is a Japanese system to support the extended employment with the similar

goal of gradual retirement. The discussion has started after mid 1970s and

the Aged Employment Security Law was in effect in 2006 after its registration

in 2004.

The Japanese gradual retirement is a supplement of the peak salary

work-share program, which is an extended employment supporting model

related to unemployment insurance system. The continued employment

benefits for the aged(高年齢雇用継続給付金) is playing the role as the

preparation of unemployment since it is supporting the payment functionally.

This system is based on the stabilization of labor-management relations and

functioned to preserve payment rate even after the decrease of earning when

the labors become 60, likewise continuous employment program or the peak

salary work-share program. In this case, The continued employment benefits

for the aged(高年齢雇用継続給付金) do not require easing of the work or

changing of the formation of employment. According to this, re-employment

system is mainly used, which is relatively flexible when it comes to treatment

including practical payment system. Also, the working hour is mainly full-time-

work.

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<Table 1> The Continued Employment Benefits in Germany and Japan

Country Model The

minimum

age of

qualificatio

n

End of

transition

period

Supplementary

Income or Other

support

The aged part

time model

linked the

Employment

Insurance

Age 55 Age 60,

62, 63, 65

70% of previous

earnings

Germany

partial pension

linked the

National

Pension

Age 60,

62, 63

Age 65 Pension support

(1/3. 1/2. 2/3)

based on

working hours

and reduced

payment level

Japan The continued

employment

benefits for the

aged

(高年齢雇用継続

給付金)

Age 60 Age 65 Based on salary

at 60;

if it is less

61% of

previous

income,

support 15%

If it is

between

61~75% of

previous

income,

support less

6

than 15%

based on

discount rate

Ⅳ . Gradual Retirement Plan in Korea

As a preparation for the aged-society, Korea has been trying to

develop more aged-friendly business model to increase and to maintain the

aged-labor’s economic activities simultaneously gaining organizational

competitiveness.

<Figure 2> Age-Friendly Business Model1

1 Jiman Lee(2006)

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As shown in figure 2, the age-friendly business model consists of 5

sub-elements. I will focus on the peak salary work-share program in this

study. As stated above, wage peak system is criticized as it is not a

continual resolution but merely a temporary expedient. Likewise, I would not

pick aged-friendly administration of business model as a sustainable module.

Therefore, I suggest the model based on gradual retirement instead of the

one based on wage peak system.

<Figure 3> Age-Friendly Business Model based on Gradual Retirement

Career

Development

for the aged

Change Careers

Support System

for the aged

Career

education and

training

program for

the aged

Employment

Promotion

for the aged

Wage Peak

System

Age-

Friendly

Business

Model

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Based on the model, it is needed that all 5 elements are connected

well into a system to create a synergy effect. Separately from system itself, it

is also important to have proper environment which can make benefits both

to the government and to the enterprises. Below is Korean economic and

social environment from the perspective of gradual retirement implementation.

First, Korean labors retire mostly around age 54 (Workers 52.3, Non-

wage workers 56.5) and they spent another 13~14 years working in abysmal

conditions before real retirement. (Korea Labor Institute, 2003) It causes old

Career

Development

for the aged

Change

Careers

Support

System for

the aged

Career

education and

training

program for

the aged

Employment

Promotion for

the aged

Gradual

Retirement

Age-

Friendly

Business

Model

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age poverty due to failure from self-employment or financial difficulty from

unofficial work only as well as psychological or emotional maladjustment.

Hence gradual retirement can ease the burden of labor for older ager by

loosening working hours while it can provide employee a job security with

government support to the company. For example, supporting partial pensions

can be a possible way to implement it.

Second, Korean National Pension has a plan for the old-age pension to

extend pension payment schedule to 65 gradually. But improved labor market

for the aged workforce is a prerequisite for the payment extension. Without

any sources of income after retirement, employees rely on their pension for

their household. Having no additional income for an extended amount of

time can cause greater problem for aged population in the long run. I insist

that gradual retirement can be utilized as a system to support the long term

and extended employment, which also compensates the defect of delaying the

pension receiving age.

Above two reasons are valid enough to introduce the gradual retirement.

Along with that, I suggest unemployment insurance model and gradual

retirement model related to the national pension system. What we expect by

this system is to get employment stability for aged people and supporting

extended employment by easing the lack of labor in the aged society. The

proper strategy for human resource management of the aged-friendly business

model is broadening overall fulfillment section.

Ⅴ . Conclusion

Ability to overcome the expected economic and social shock of coming

aging society is required for our country and individual companies. In this

study, I suggested the way to introduce the gradual retirement for Korea

through foreign case studies. In case of Korea, to fight with the unstable

employment and coming lack of labor, we suggested the gradual retirement

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plan related to employment insurance and national pension and aged-friendly

business model based on it for both individual and the country.

Since the models for the individual, enterprises and the country are

organically connected, the goals of aged-friendly business model based on the

gradual retirement pursuits can be met only when it is approached to the

comprehensive synthetic dimension effectively.