Let the market lead

If the first button on a shirt is wrong, then every button will be wrong. This phrase cannot better explain the government’s policy on jobs. It came up with new measures specifically to address youth unemployment.

The biggest was to hand out up to 10.35 million won ($9,681) to any young jobseeker that gets a job in a small or mid-sized enterprise. Those opting for a job in a small and mid-sized workplace will be exempt from income tax and granted privileges in getting bank loans for housing at cheap rates. They will even be subsidized for transportation costs. State subsidies will be increased for small and mid-sized employers that increase hiring.

This is yet another makeshift measure. It raises questions over whether the policy design of narrowing the gap in employee incomes between large and small companies and encouraging more young jobseekers to find options in smaller workplaces can be reached.

The number of young university graduates looking for a job will continue to increase. They will be entering the already thin job market. The government has to come up with radical actions to squeeze out as many jobs as possible.

But increasing jobs through fiscal support cannot last. The government has introduced 21 jobs measures over the last decade, but they have not helped. Jobs come from the business sector. It is therefore important to strengthen businesses so that they will voluntarily employ people.

Financial assistance can induce a small employer to increase hiring and a jobseeker to settle for a smaller workplace.

The problem in Korea is that college graduates prefer big-name companies. In reality, the money could end up in the pockets of those who already intended to find a job in a small workplace or a company that planned to increase hiring regardless of the new measure. Instead of creating new demand and supply on the job front, what we may see is a deadweight loss — cost waste due to policy inefficiency — as the actual effect could be less than expected.

Jobs are created when polices are business and market friendly, so as to stimulate companies to increase hiring and investment and the young to work eagerly. The government should make the business environment favorable to lure companies back to the country and make jobs at home. The labor market must be reformed and regulations lifted. That should have been the first button on the job front.

The government must go back to the start and re-examine the pace of increase in minimum wage and other anti-employer policies.

JoongAng Ilbo, March 16, Page 30