APPENDIX
Calculations of Deferred Compensations in Four Decades
The following formula is constructed by incorporating all considerable factors
that could influence the total amount of deferred compensation.
Total Earning After Retirement = Probability of Getting a Post-retirement Job *
{(Salary of Public Firms * Years of Service in Public Firms) + (Salary of Private Firms *
Years of Service in Private Firms * Probability of Getting a Private Job)}
The results are shown in the table at the end of this page where I fixed the
government salary as 100, payments of public firms as 1.28 of government salary, and
the age of “final” retirement as 65. The ground for 1.28 times of government pay by
public firms is that the Korean government set up the rule of thumb in adjusting salaries
of both government and public firms compensation as 1: 1.28, or with government salary
approaching 79 percent of public firms counterparts. The age of final retirement
borrowed from the most popular retiring time in Korea, i.e., 65.
There are exceptions where some bureaucrats moved to private firms directly but
they are fully reflected in the averaged years of service in public firms. Expected deferred
compensations shown in the last column of the table are equivalent to the total amount of
post-retirement earning in a relative term of government salary, i.e., 100. That is, a
bureaucrat of the 1970s could expect an equivalent of four and half year-equivalent
government salary when he retired from the government. The recent deterioration of
deferred compensation is clear from the results where the retiring bureaucrats of the
1990s could expect slightly over half of those of previous decades.
(results)
Government
Salary
(absolute)
Public
Salary
(absolute)
Public
Service
(years)
Private
Salary
(relative to
government
)
Private
Service
(years)
(Expected) Deferred
Compensation
1960s
100
128
12.1
103
12.5
450
1970s
100
128
8.9
127
9.3
454
1980s
100
128
7.7
158
5.2
433
1990s
100
128
3.9
172
6.5
253
30
Convention