Tuesday, June 2, 2020
Policy Loopholes in Implementing Wage Peak System in Public Sector
Peak Loopholes
Policy Loopholes in Implementing Wage Peak System in Public Sector
  • By matthew
  • October 13, 2015, 03:30
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As of Sept. 4, 100 public corporations have so far adopted a wage peak system in line with the government's efforts to produce more jobs for youth. During a presidential speech addressed to nation on Aug. 6, President Park announced that in the next two years, public offices will create 8,000 jobs for youth by adopting the wage peak system. According to the Ministry of Strategy and Finance (MOSF), the government is expecting 316 public organizations and agencies to adopt the wage peak system by the end of this year, with the money saved through the system to be used to hire new employees.

At least in theory, this is how the wage peak system is supposed to work. Namely, the peak wage system calls for the extension of the retirement age, giving old workers greater job security. The same people benefiting from the system, on the other hand, must accept lower wages just before retirement, as the money freed up through the wage-savings is to be used to hire younger employees in a kind of work sharing arrangement.

Nevertheless, when it comes to hiring new recruits, the effect of the adaptation of the wage peak system doesn’t work as expected. Out of 96 public offices that have implemented the wage peak system, 37 organizations just can’t afford to hire new recruits next year, thanks to the MOSF policy of slimming down the public sector and cutting down public spending. For instance, following the number of recruits pre-set by the MOSF, Incheon International Airport, an organization with 100 employees, and Korea Technology Finance Corporation with 5,000, plan to hire 5 and 7 new workers next year, respectively. An insider speaking on the condition of anonymity said that given that MOSF has been committed to cutting down public spending and slimming down the public sector for the past couple of years, it won’t be easy for public sectors to switch policy directions and bring about sudden results in boosting employment.

He added that any effort to hurriedly to increase the number of new recruits may rather end up producing temporary positions and part-time jobs.

It is noteworthy that according to Paragraph 1 of Special Article 5 on the operation of public institutions, annual employment by the public institution has to include upwards of 3 percent of new, inexperienced recruits. Nevertheless, some public institutions like Korea Land and Housing Corporation (LH), Korea Construction Management Corp., Korea Infrastructure Safety & Technology Corporation, and Korail (Korea Railroad Corporation) have failed to meet this requirement. As of Sept. this year, Korail has hired no one.