Peak wage system in use at 11 major firms: studyEleven out of 25 major conglomerates in Korea have completed the implementation of the government-promoted “peak wage system” as of January, a survey by the Federation of Korean Industries (FKI) said on Sunday.
At a time of the highest-ever youth unemployment in the country, the Park Geun-hye administration has been pushing aggressively for labor reforms, primarily the peak wage system that is aimed at creating more jobs for youth.
The job situation has gotten particularly worse for young people, which has added to concerns about a decelerating economy. According to Statistics Korea, the unemployment rate for people between the ages of 15 and 29 in January was 9.5 percent.
Under the peak wage system, older workers’ salaries plateau or decline by around 10 percent gradually as they approach the retirement age of 60, making way for younger hires.
The government also plans to give financial incentives to companies that implement the peak wage system and hires young employees. The government will offer subsidies of up to 10.8 million won per employee for employers who adopt the system. Employees who earn less than 72.5 million won ($5,874)will be subject to the subsidy.
More than 90 percent (287 out of 313) of state-run corporations are now operating under the new wage system, according to the Ministry of Strategy and Finance. The ministry hopes the private sector follows suit.
According to the FKI survey, the 11 groups are Samsung, Hyundai Motor, LG, Lotte, Hanjin, Doosan, CJ, Daelim, Hanjin Heavy Industries & Construction, Hankook Tire and Samchully. All subsidiaries of the family-run groups have adopted the wage system in line with the government initiative.
Some affiliates of LG, Hanjin and Hanjin Heavy Industries & Construction, whose employees are fewer than 300, are going to adopt the system by 2017.
Three conglomerates - GS, LS and Hyundai Development Company -said they plan to complete introduction of the system by this year, the survey said.
Except for two subsidiaries, Hanwha Group has also implemented the wage system. While Hanwha Securities does not need such a system due to its one-on-one salary contract system, Hanwha Co., developer of private-funded stations, plans to join the other subsidiaries within the year.
?Chung Jo-won, head of the environment and labor team at the FKI. “It is urgent for companies to accept the system in order to find some room to create new jobs.”
BY SONG SU-HYUN [email@example.com]