South Korea's government subsidy program designed to encourage businesses to keep elderly workers employed past retirement age has experienced a significant contraction over a three-year period, according to recent parliamentary data.

Data obtained from the Ministry of Employment and Labor by Representative Park Hae-chul of the Democratic Party and the National Assembly's Environment and Labor Committee revealed that the total number of businesses receiving the "Elderly Continued Employment Subsidy" fell from 3,028 in 2022 to 2,271 last year, marking a sharp decrease of 757 businesses or 25 percent. During the same period, the total number of subsidized workers declined slightly from 7,994 to 7,698, a 3.7 percent drop, while total expenditures dropped by 9.5 percent from 22.63 billion won to 20.49 billion won.

A closer analysis of the data highlights a stark polarization based on business scale. Micro and small enterprises with fewer than 50 employees suffered a severe contraction. The number of businesses under 50 employees receiving the subsidy plunged by 32.8 percent, dropping from 2,400 in 2022 to 1,613 last year. The number of supported workers in this category also fell by 25.6 percent, going from 4,290 down to 3,192.

In sharp contrast, businesses with 50 or more employees saw an increase. The number of larger workplaces receiving the subsidy grew from 628 to 658, while the number of supported employees expanded by 21.7 percent from 3,704 to 4,506. This divergence indicates that while overall participation is shrinking, smaller businesses are struggling significantly more to maintain or benefit from the program.

Industrial shifts were also evident among the beneficiary companies. Manufacturing firms increased their share of total supported businesses from 50.3 percent (1,523 companies) in 2022 to 58.1 percent (1,320 companies) last year. Conversely, the proportion of health and social service sectors dropped substantially from 18.7 percent (565 companies) to 12.2 percent (277 companies).

The Elderly Continued Employment Subsidy program provides financial incentives to employers who extend or abolish retirement ages, or choose to continue employing or re-hiring workers past retirement age. The government provides 900,000 won per quarter for each eligible worker for up to three years. This incentive is a crucial policy pillar discussed alongside broader legislative efforts to extend the official retirement age, a measure the government aims to institutionalize.

Experts and lawmakers point out that the widening gap in smaller workplaces poses serious socioeconomic risks. Representative Park Hae-chul emphasized that the income cliff—the gap between official retirement and the age at which individuals become eligible to receive the National Pension—hits laborers in small, vulnerable businesses much harder. He noted that for the continued employment system to serve as a practical and effective tool for extending working life, targeted institutional improvements and differential support structures are urgently needed to bolster smaller enterprises that lack the financial buffer of larger corporations.