Gov't mulls 3 pct wage hike for public sector in 2016: source

The government is mulling a 3-percent wage increase for public-sector corporations in 2016 as it tries to push state-run companies to set the pace for the country to switch to a wage peak system aimed at creating more jobs, a finance ministry source said Tuesday.

The increased rate that will be finalized in early December is the same as those for government workers, but lower than the 3.8 percent hike agreed upon for 2015.

Public-sector wages shot up 5.1 percent in 2011 and dipped to 1.7 percent in 2014 before rising again this year.

The move to maintain a relatively high rate of increase, despite challenging economic conditions facing Asia's fourth-largest economy, comes as the government is trying to get public companies to adopt the wage peak system within the year.

"The 3-percent rate reflects ongoing efforts to get the public sector to switch to the wage peak system," said the insider, who declined to be identified.

The government has hinted in the past that wages of corporations that make the switch will be marked up by 3 percent, while those that do not, may have to settle for as low as 1.5 percent.

Policymakers are aggressively pushing for corporations to adopt the wage peak system because it can influence similar moves being undertaken by the management of private companies.

The wage peak system advocated by the government calls for workers nearing retirement age to accept lower wages, with the money saved by this arrangement to be used to hire new employees.

Seoul claimed that this work sharing agreement is critical because the country's retirement age will be pushed back to 60 in 2016 from around 58 at present.

The change in the retirement age can cause companies to hold off on hiring workers to control a spike in personnel expenses, which can result in fewer jobs being created in the next couple of years.

The government also said that corporations that make the switch early may benefit fully, while those that are slow to act could have to settle for smaller hikes.

The state-run Korea Development Bank, the Export-Import Bank of Korea and state-run university hospitals that have been slow to make the switch may be allowed just 2.25-percent wage hikes for 2016, even if they accept the wage peak system in November and December.

Reflecting the urgency and heavy push by the government, of the 316 public corporations and institutions, 136, or 43 percent, have adopted the wage peak system as of Thursday. Of the large public companies, only a handful such as Korea Railroad Corp. and Korea Gas Corp. are still carrying out negotiations with workers.

Despite the progress made, there are some state-run think tanks whose retirement age already stands at 61, who have opposed the wage peak system because they will have to accept fewer wages without any benefits from the change in retirement age. (Yonhap)