Chang Yong-sung, a member of the Bank of Korea (BOK) Monetary Policy Board, speaks during a press conference at the central bank, Wednesday. Courtesy of BOK

The labor productivity of Korea's overachieving, hard-working and competent pool of workers remains only half that of their U.S. peers, stunted by the Asian country's seniority-based promotions, a monetary policy board member of the central bank said Wednesday.

The seniority-based promotions are defined by school, place of birth, family ties as well as mandatory short-term reshuffle limiting in-depth career expertise development.

According to Bank of Korea (BOK) Monetary Policy Board member Chang Yong-sung, the decades of inefficiency in and misallocation of an academically stellar Korean workforce could be fixed with the performance-based evaluations used in the U.S., where job sorting matches workers to tasks based on their capabilities, promoting labor productivity and job satisfaction.

He added that Korea's contentious ongoing discussion of extending the retirement age is premature and bound to fail, unless preceded by greater labor flexibility and salary overhaul for highly paid older employees.

“Korean workers in low-skilled, face-to-face professions are overqualified and seem smarter compared to their U.S peers,” Chang said during a press conference.

This is because competent workers in the U.S. are promoted to office jobs far faster than in Korea without consideration for practices that factor in age, work experience, academic and family backgrounds, he said.

“The only relevant factor is whether that person is competent, a mindset that is not as prevalent for Koreans — at least for older generations anyway,” he said.

According to the Ulster Institute for Social Research, a think tank, Korea ranked sixth in the national intelligence quotient (IQ) among over 30 countries. The U.S. ranked 29th.

However,OECD data showed Korea's labor productivity was only 59 percent of the U.S. when it was measuring output per person and 56 percent when measuring output per hour.

Chang said the U.S. system singularly focuses on talent to the exclusion of almost all other variables when it comes to employment. “For Koreans, where you went to school, where you were born and who you have family or close ties with matter more often than not."

The terms of U.S. central bank heads, for example, are a case in point.

Alan Greenspan, born in 1926, served as the 13th chairman of the U.S. Federal Reserve from 1987 to 2006, under four U.S. presidents.

“As long as they are up to the task, term extensions were almost a guarantee," he said.

This fosters a culture of pure meritocracy, especially in comparison to Korea where competent senior employees altogether leave when their peers with the same years of work experience are promoted — an unfortunate example of a seniority-based employment system.

“The practice is a total waste of the expertise and experience of older workers. In the U.S. termination of employment due solely to the retirement age was declared unconstitutional for many professions. Young workers want to learn from and work with their older peers, as long as they are competent, well-versed in their field of choice and of a good character," Chang said.

Also at play is a culture of obedience. Koreans rarely say no, especially to their seniors.

Opinions challenging the status quo or longstanding practices are considered not only rude but also unimaginable, almost always ending up with criticisms of how their parents failed in “proper” childrearing.

“One U.S. professor jokingly said that Korean students have learned everything they need to when they begin to say no, which goes to show how obedient they have been," the board member said.

As for the flexibility of the labor market, Chang added, fast, short-term and deep collapse fosters economic resilience.

“The U.S. crashes at a rapid pace in times of crisis but bounces back just as fast,” he said. “They are merciless, so to speak, in slashing jobs but extremely effective in capital and resource reallocation. In Korea, many unviable firms are extended by government assistance, a factor against swift recovery.”

The retirement age extension, in that sense, needs a major employee remuneration overhaul.

“The retirement age extension under the current salary system will bring an outcome that is not only undesirable but irreversible," he said.

The current limit of two years of retention should be revised to up to five years to give senior workers greater options, Chang said. "Otherwise, they will open a self-employed business, exacerbating the country's structural challenges in the labor market.”