For performance-based salariesThe government and labor unions are debating over a performance-based annual salary system in public agencies. The annual salary system is a necessary institution. According to an OECD survey on adult skills, the skills of Koreans in the public sector drastically decrease as they grow older and become one of the lowest in the OECD after age 45. Civil servants in Korea are guaranteed tenure, and the wage goes up by salary schedule automatically.
It is no coincidence that the Koreans and Japanese in the public sector have the lowest willingness to learn among OECD member countries. Some civil servants don’t want promotions because executive positions are not guaranteed until retirement age. So there needs to be motivation for public servants to work harder.
The same applies to the private sector. In the salary schedule system, workers get higher wages for productivity as they grow older.
Therefore, companies prefer workers for which the salary schedule does not apply, in other words, contract workers. The salary schedule is one of the reasons why wage earners retire at age 52 and more than one-third of the employed are contract workers.
It is tiring to live in a world where people are evaluated based on performance. But in times when productivity is the only hope, with employment and investment sluggish, the performance-based annual salary system opens doors to opportunity. We must not kick aside the opportunity because of side effects when growth is slow. It is better to introduce the salary system and work to resolve side effects.
It is important that the government make efforts to communicate in the course of implementing the new system. It should be made clear that the salary system is unrelated to weeding out low-performing workers. When the salary system is introduced, the need to weed out low-performing workers significantly decreases. In the public sector, problematic workers who need to be kicked out are extremely few. As weeding out is too controversial compared to the actual effects, the government should approach it more flexibly for successful introduction of the salary system.
Reform is about the right timing, and a timeline for introducing the system within the year should be set. But the government can be flexible on the timeline for application. Many of the agencies that already have the salary system and prepared evaluation system can begin applying it to next year’s salaries. But the agencies that need to drastically change their evaluation system should base next year’s performance on a new system and begin applying it to salaries in the following year.
Acceptance of the members is necessary for a successful performance evaluation and compensation system. A performance-based salary system needs to be introduced successfully for productivity-oriented growth and to prevent early retirement and the expansion of contract employment.
*Professor at the KDI School of Public Policy and Manageme