Tallying the costs of public sector hiring blitz

The Moon Jae-in government has been under intense pressure to boost job numbers, which until now have been disappointing.

In response to the statistics, it appears state and state-related entities are being pushed to increase employment. Total government headcount is up more than 8.3 percent since the end of last year.

This seems likely to continue as next year’s budget for public institutions is increasing more than 7 trillion won ($6.2 billion) from this year, and much of that money could be used for hiring.

The concern is that the sudden increase in numbers could harm the nation’s fiscal soundness.

According to Ministry of Finance and Economy data, the number of people working at 360 public institutions as of the end of September totaled 378,866, 31,637 more than at the end of 2017.

Among the institutions, the Korea Racing Authority has hired the most. The number of employees has nearly tripled from 1,143 at the end of last year to 3,110. Among the 1,967 newly-hired employees, 523 are contract workers. The number of newly-added employees is a significant increase compared to the 16 new hires made in all of 2017.

Most of the contract workers keep order at the racetracks or are in information services. They are employed only one or two days a week and take home between 300,000 won and 800,000 won a month.

During the National Assembly audit last month, Liberty Korea Party (LKP) lawmaker Kim Tae-heum criticized the quality of the positions being offered and noted that half of workers taken on quit not long after they are hired.

The Livestock Health Control Association added 275 employees in the first nine months of the year after hiring only 48 last year. The Korea Youth Counseling and Welfare Institute hired no one last year, keeping the total number of employees at 65. But this year it increased its payroll by 140, boosting the total number of staff to 205.

The situation is much the same at other institutions.

Korea National Park, which only employed 30 people in 2017, hired 908 this year, while the National Institute of Ecology hired 330 this year, a surge from four last year.

The boost in hiring at public institutions is expected to have a major impact on the country’s fiscal situation.

According to the office of LKP’s Choo Kyung-ho, the operating profit of 35 major state-owned companies last year totaled 13.1 trillion won, a 33 percent drop from the previous year’s 19.1 trillion won. During the same period, revenue fell 6.1 percent while net profit was down 2.7 percent.

Debt at these public institutions amounted to 495 trillion won.

“The total debt of the public institutions is equivalent to one third of the nation’s economy,” said Yoo Seung-yeop, member of the Party for Democracy and Peace. “While this is having a negative influence on the nation’s fiscal soundness, I see no specific will from public institutions in reducing their debt.”

Kim Won-shik, a professor of economics and Konkuk University, said the sudden increase in hiring will lead to growth in the public sector deficits in a short period of time, which would eventually add to the public burden.

It is a common sentiment, even within government circles.

In a report released by the finance ministry last month, the increasing public debt was covered. The report noted that Korea was experiencing a sharp increase in public institution debt, which is now far higher than international averages. Public institution debt accounts for 23.6 percent of Korea’s overall debt, which is more than two times the 10.7 percent OECD average.

“The debt ratio of public institutions compared to the GDP is at a high level, and we need to be careful,” a Finance Ministry official said.

The situation could worsen, especially as the average salary of employees working at public institutions has been rising 1 to 2 percent annually since 2013. Last year, the average public salary monthly salary totaled 67 million won, up from 63 million won in 2013.

According to the National Assembly Budget Office, the government has set the 2018 budget at 74.4 trillion won, up from this year’s 68 trillion won. Much of the budget could be used to increase the number of employees to meet one of the most urgent policies of this administration: creating jobs.

“Public institutions are not institutions that see revenue increases with the expansion of staff,” said Lee Byung-tae, a professor of business management at the Korea Advanced Institute of Science and Technology (KAIST). “The government is encouraging reckless management with its current job measures,”

Lee added that the principle of strict human resources management at public institutions practiced by previous administrations has gone out the window under the current administration’s policy. Not only is debt seen increasing, but bills could also rise.

According to Lee Man-woo, a business management professor at Korea University, the personnel structure is not properly structured: it needs to be in a thick pyramid form, but the increase in public employment is leading to an unstable vase shape with too many inexperienced workers given the existing management capacity.

“If the lower-level employees are mostly temporary workers, middle management will become anxious and internal productivity will be affected,” he said, adding that putting more relatively unproductive workers in public institutions could lead to the insolvency of public companies.

BY SUH YOU-JIN [lee.hojeong@joongang.co.kr]