The government is increasing its pressure on the public sector to adopt the wage peak system within the year, hoping it would help create thousands of new jobs for young people.

State-run organizations and public companies that take up the compromising wage system may receive extra credits in their performance evaluation and incentives when negotiating annual wage hikes, officials said Wednesday.

They also warned that organizations that do not abide could face a near-zero salary increase, as well as budget cuts or restructuring.

They made the remarks after the Ministry of Strategy and Finance held a meeting Wednesday to brainstorm the public sector reform plan, focusing on the introduction of the wage peak system.

“The public sector is the starting point for all social reforms, but when it comes to labor reforms, it has so far failed to set an example in the market,” said a ministry official.

The ministry’s toughened stance reflects its growing concerns that without the wage peak system, the administration’s comprehensive reform plans may fade out altogether, observers said.

In a public statement last week, President Park Geun-hye pledged to establish the system in all public organizations within the year, but only 11 out of 316 organizations have adopted it so far.

If all public companies accept the new wage system, some 8,000 new jobs will be created over the next two years, according to ministry officials.

The wage peak system, allowing retirement-age employees to continue to work under a gradually decreasing salary, aims at promoting job security for senior workers and making room for young job seekers.

The lack of jobs, especially for young people in their 20s, is increasingly weighing down on the nation’s economy. The jobless rate for people aged 15 to 29 stood at 9.4 percent in July, 2.5 times higher than the national average of 3.7 percent, according to Statistics Korea.

The government also said it will streamline procedures for public corporations and organizations in social overhead capital, agro-fisheries, and culture and art fields, aimed at saving up to 7.6 trillion won ($6.4 billion) of budget.

Government-funded research and development projects in energy, health care, policy financing and environment will be reorganized, merged or scrapped within the year.

By Bae Hyun-jung (tellme@heraldcorp.com)