Expanding the Civil Service: Time to Face the Failure

“Civil Servant Republic” is a phrase that has recently emerged in response to the rapid increase in the number of public officials in Korea. It is no longer a story about some distant country, but a reality now confronting us. Since the launch of the Moon Jae-in administration, the number of public officials has increased by more than 100,000. This is 2.2 times the total increase during the Lee Myung-bak and Park Geun-hye administrations combined, and also represents a 23.7% increase compared with the first year of the Moon administration.

Why, then, has the number of public officials surged so sharply? It is because the Moon administration has focused more on expanding jobs in the public sector than on increasing private-sector employment. An increase in jobs is certainly welcome, but growth so heavily concentrated in the number of public officials produces many side effects.

The sharp rise in the number of public officials immediately places a burden on public finances. This year, the central government’s personnel expenses for public officials exceeded 40 trillion won. According to a report by the National Assembly Budget Office, further increases in the number of public officials will require 327.7847 trillion won in labor costs over 30 years, excluding pensions and based on the wages of Grade 9 public officials. Public-sector labor costs, which have risen so rapidly, also surpassed the combined labor costs of Korea’s 500 largest private companies for the first time since 2016.

An even more serious problem is pensions. The national budget for paying civil service pensions has long since run dry. In other words, civil service pension payments become government debt as they are, threatening fiscal stability. That debt had already reached 1,044 trillion won in 2020, and unless the number of public officials declines, it can only continue to increase at an even steeper pace.

Beyond the immediate fiscal problem, the rapid increase in public officials also causes a shortage of talent and saps the vitality of society. As the number of government positions being filled has expanded sharply, many young people now aspire to become so-called “iron rice bowl” public officials, and the number of civil service exam takers alone has reached 300,000. According to a survey conducted by Statistics Korea, 3 out of every 10 young job seekers preparing for employment are preparing for the civil service exam. Under these circumstances, private companies are experiencing a severe talent shortage. The current reality is that Korea needs every available talented worker in fields such as software and new digital technologies in order to strengthen its competitiveness in the global market. But as jobs become concentrated in the public sector, an asymmetry in labor supply to the private sector is emerging.

As an economy develops, it naturally requires more public officials, and their numbers tend to increase. This is a natural phenomenon accompanying greater administrative demand on the government. However, increasing only the number of public officials without revitalizing the private economy and achieving economic growth harms efficiency across the economy as a whole. In other words, the current increase in the number of public officials is not helping strengthen national competitiveness. Last year, when the Swiss-based International Institute for Management Development evaluated national competitiveness across 64 countries, the efficiency of Korea’s government actually fell by six places from the previous year, ranking 34th. In the end, the rapid increase in the number of public officials is swelling public finances wastefully and bloating the size of the public sector, all without producing meaningful benefits.

The current situation brings to mind the Greek crisis. In Greece, where the “Civil Servant Republic” first emerged, the number of public officials grew from 300,000 in the 1980s to 770,000 in 2010, creating a situation in which 1 out of every 4 workers was a public official. As a result, an amount equivalent to half of GDP came to be poured into public officials’ labor costs alone. Even as debt became extreme, the country continued paying wages by borrowing from the EU in order to maintain the number of public officials. This led to a relentless buildup of government debt, and Greece received the largest bailouts in history on multiple occasions. Eventually, it failed to repay its debt to the International Monetary Fund and fell into sovereign default, becoming the first advanced country in history to do so. If Greece’s experience seems to reflect Korea’s current reality, is that really excessive alarmism?

What Korea needs is not a greater number of public officials. The increase in the number of public officials has brought only weak public finances and labor shortages in the private sector. Expanding the number of public-sector officials simply to increase jobs in the short term can only end up harming everyone. It is time to stop pursuing a course that brings only loss and shift policy in a direction that allows private-sector jobs to grow.

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Original title: 공무원 수 늘리기, 이젠 그 실패 직시할 때

Author: Sung-no Choi

Date: 2022-02-15

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24537