Start of Social Dialogue on Public Institution Job-Based Pay System Reform... Accelerating Step-Based Pay Improvement

The 2nd Phase of the Public Institution Committee Launches... Significant Impact on the Private Sector, Labor Opposition Expected

[Sejong=Asia Economy Reporter Moon Chaeseok] Social dialogue has begun to change the public institution wage system from a seniority-based pay scale to a job competency-based job pay system. This is an important dialogue that could have a long-term impact on the salary systems of private companies as well. During the dialogue process, there may be strong opposition from labor groups, especially from existing long-term employees.

The Economic, Social and Labor Council (ESLC), a social dialogue body under the direct control of the president, announced on the 25th that it will reactivate the Public Institution Committee under its jurisdiction. The first Public Institution Committee was launched in November 2019 and its term ended last November, so a second Public Institution Committee will be newly formed. The operation period is set for nine months from this month until March next year.

The first Public Institution Committee previously announced major agreements including the introduction of a job-centered wage system, improvement of the wage peak system, and the introduction of a labor director system. Among these, the agreement on the introduction of the labor director system has been reflected in related bills, and the legislative process is underway.

The second Public Institution Committee plans to focus on follow-up discussions regarding the introduction of a job-centered wage system and improvement measures for the wage peak system. To this end, detailed agendas have been finalized, including ▲a survey on the current status of public institution wage systems ▲job-centered wage system and personnel management measures ▲a survey on the current status of the public institution wage peak system ▲and mid- to long-term development plans for the wage peak system.

If the Public Institution Committee reaches a concrete agreement on the introduction of a job-centered wage system, it could have a significant impact on private companies as well. The job pay system is emerging as an alternative to the seniority-based wage system structure, often called the 'iron rice bowl.' The seniority system automatically increases wages based on years of service, which inevitably acts as a risk factor in an era of low growth and aging population. This can cause a surge in corporate labor costs. It is also cited as a background for extreme wage disparities.

Since the government is the employer of public institutions, the dialogue is mainly conducted between the government and labor groups. Expert public interest commissioners play a mediating role. Professor Lee Sangmin of Hanyang University was appointed as the chairman. The chairman said, "The reform of the wage system and improvement of the wage peak system in public institutions is a task that cannot succeed without trust and cooperation between labor and management."

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