The Korean government has been pressing to normalize public institutions in a bid to reduce their debts and prevent slackness in their management. The latter effort primarily concerns preventing excessive payment of schooling expenses, medical expenses, cash gifts for special events, and the like to workers of public institutions that already offer employees excellent fringe benefits. As of 2012, public institutions’ fringe benefits with the nature of wages amounted to KRW 2.6 million per employee annually, which is only 4.2% of KRW 61.54 million in average annual compensation per employee. Proper assessment of the management of a public institution requires determining whether its total labor costs including fringe benefits are appropriate.
This assessment report primarily compares wage levels and schemes of public institutions and private companies. It empirically ascertains whether public institutions have a high wage level, given both the personal and occupational attributes of individuals working for public institutions or private companies, and analyzes what problems exist in their wage schemes. Then, it suggests possible improvements. The National Assembly Budget Office collected data on wages for 2012 paid to individual workers of 295 public institutions designated as of 2013 and examined the workers' occupational and personal attributes.
Assessment findings are summarized as follows.
Firstly, public institutions’ average monthly wages per employee stood at KRW 5.09 million, 32.2% more than KRW 3.85 million at private companies. The primary factors in such wide wage gap in their average monthly wages are age and the period of service. The average age of regular workers at public institutions is 41.6, 3.6 years more than the average age of 38.0 at private companies. The
average period of service at public institutions is 14.8 years, 5.5 years longer than 9.3 years at private companies. The older employees get, the greater the disparity in the service periods is. Thus, the wage gap grows as employees become older.
Regression analysis reveals that out of the overall wage gap of KRW 1.24 million (32.2%) between public institutions and private companies, KRW 1.1 million (28.5%) is attributed to variance in personal attributes including gender, age, years of service, and education as well as occupational attributes such as industry and vocation while the remaining KRW 140,000 (3.7%) represents a net wage gap between public institutions and private companies. In other words, employees at public institutions earn KRW 140,000 more per month than workers at private companies, ceteris paribus.
Secondly, public institution employees who have a high school or lower diploma and who graduated from junior college are respectively paid KRW 460,000 and KRW 270,000 more per month than private company workers, according to estimates by degree of schooling. This suggests that there exists an excessive wage gap among private company workers vis-a-vis said public institution employees, considering the variance in productivity by level of education. It turned out that employees of public institutions engaged in administration and machinery operation duties and in the electricity, gas, and transport industries receive higher wages than their private-sector counterparts. Workers for public institutions enjoy greater job security, in addition to receiving higher wages. It is necessary to take a closer look at whether their wage level is appropriate in view of their productivity and the relative wage level of private-sector workers.
Thirdly, there exists a net wage gap of KRW 970,000 (19.1%) between regular and non-regular employees of public institutions. This attests to harsher wage discrimination against non-regular employees at public institutions than at private companies where such net wage gap amounts to only KRW 110,000 (2.8%). The most important factors in such gap between regular and non-regular employees at public institutions seem to be a disparity in age and service period. Regular employees have an average age of 41.6, about 9.2 more years than non-regular employees, who are 32.4 years old on average. The difference in years of service between them is 12.5 years: 14.8 years for regular employees and only 2.3 years for non-regular employees. Non-regular employees of public institutions still have a short period of service even if they age, and their wages remain low as a result. What is more, the wage gap between regular and non-regular employees widens as they grow older. Non-regular employees have less job security than regular employees, and their wages are lower than those of regular employees. The wage gap is much wider at public institutions than at private companies. Since public institutions set examples for all employers, they clearly need to raise the wage level of non-regular employees relative to that of regular employees.
Lastly, performance-based annual salaries account for 16.1% of the total compensation at public institutions, which is 9.1%p lower than 25.2% at private companies. The Ministry of Strategy and Finance (MOSF) recommends that performance-based annual salaries at public institutions make up at least 20% of total annual salaries and at least 30% at public enterprises. The average ratio of performance-based annual salaries at public institutions is only 16.1%, and at public enterprises, it is only 19.6%. The reason why these ratios fall short of the MOSF’s recommended standards must be discovered. In other words, careful study and analysis needs to be conducted to ascertain whether expansion of the performance-based annual salary system actually increases productivity in order to determine whether public institutions must increase the ratio of these salaries or whether
said standards must be eased.
This assessment report primarily compares wage levels and schemes of public institutions and private companies. It empirically ascertains whether public institutions have a high wage level, given both the personal and occupational attributes of individuals working for public institutions or private companies, and analyzes what problems exist in their wage schemes. Then, it suggests possible improvements. The National Assembly Budget Office collected data on wages for 2012 paid to individual workers of 295 public institutions designated as of 2013 and examined the workers' occupational and personal attributes.
Assessment findings are summarized as follows.
Firstly, public institutions’ average monthly wages per employee stood at KRW 5.09 million, 32.2% more than KRW 3.85 million at private companies. The primary factors in such wide wage gap in their average monthly wages are age and the period of service. The average age of regular workers at public institutions is 41.6, 3.6 years more than the average age of 38.0 at private companies. The
average period of service at public institutions is 14.8 years, 5.5 years longer than 9.3 years at private companies. The older employees get, the greater the disparity in the service periods is. Thus, the wage gap grows as employees become older.
Regression analysis reveals that out of the overall wage gap of KRW 1.24 million (32.2%) between public institutions and private companies, KRW 1.1 million (28.5%) is attributed to variance in personal attributes including gender, age, years of service, and education as well as occupational attributes such as industry and vocation while the remaining KRW 140,000 (3.7%) represents a net wage gap between public institutions and private companies. In other words, employees at public institutions earn KRW 140,000 more per month than workers at private companies, ceteris paribus.
Secondly, public institution employees who have a high school or lower diploma and who graduated from junior college are respectively paid KRW 460,000 and KRW 270,000 more per month than private company workers, according to estimates by degree of schooling. This suggests that there exists an excessive wage gap among private company workers vis-a-vis said public institution employees, considering the variance in productivity by level of education. It turned out that employees of public institutions engaged in administration and machinery operation duties and in the electricity, gas, and transport industries receive higher wages than their private-sector counterparts. Workers for public institutions enjoy greater job security, in addition to receiving higher wages. It is necessary to take a closer look at whether their wage level is appropriate in view of their productivity and the relative wage level of private-sector workers.
Thirdly, there exists a net wage gap of KRW 970,000 (19.1%) between regular and non-regular employees of public institutions. This attests to harsher wage discrimination against non-regular employees at public institutions than at private companies where such net wage gap amounts to only KRW 110,000 (2.8%). The most important factors in such gap between regular and non-regular employees at public institutions seem to be a disparity in age and service period. Regular employees have an average age of 41.6, about 9.2 more years than non-regular employees, who are 32.4 years old on average. The difference in years of service between them is 12.5 years: 14.8 years for regular employees and only 2.3 years for non-regular employees. Non-regular employees of public institutions still have a short period of service even if they age, and their wages remain low as a result. What is more, the wage gap between regular and non-regular employees widens as they grow older. Non-regular employees have less job security than regular employees, and their wages are lower than those of regular employees. The wage gap is much wider at public institutions than at private companies. Since public institutions set examples for all employers, they clearly need to raise the wage level of non-regular employees relative to that of regular employees.
Lastly, performance-based annual salaries account for 16.1% of the total compensation at public institutions, which is 9.1%p lower than 25.2% at private companies. The Ministry of Strategy and Finance (MOSF) recommends that performance-based annual salaries at public institutions make up at least 20% of total annual salaries and at least 30% at public enterprises. The average ratio of performance-based annual salaries at public institutions is only 16.1%, and at public enterprises, it is only 19.6%. The reason why these ratios fall short of the MOSF’s recommended standards must be discovered. In other words, careful study and analysis needs to be conducted to ascertain whether expansion of the performance-based annual salary system actually increases productivity in order to determine whether public institutions must increase the ratio of these salaries or whether
said standards must be eased.