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[OUTLOOK]If it’s not broken, don’t fix it

Published: 30 Jan. 2004, 22:22

In the constitution of the former Soviet Union, there were what was called the twin principles of work. The first principle can be summarized as “Anyone who does not work in a Communist country is a parasite, a criminal.” Therefore, all citizens have a social duty to work. But in order to work, all citizens need to have jobs. So, as the second principle states, the state must provide the people with the right to work.
The Soviet government provided jobs to laborers who weren’t able to find any. In the former Soviet Union, any employer who fired an employee was required to find a new job for that employee. Thus, the Soviet Union could boast of being a country with 100-percent employment, whether all that human labor was needed or not. And of course, after the reforms and the opening of the country, most people lost their jobs.
Is there no lesson to be learned from these policies and government measures of the fallen socialist system for our government in its efforts to create jobs today? Wednesday, the government announced that it would give a tax credit of 1 million won ($833) to private firms for every full-time employee they hire during the next three years. State-run businesses are also to start a big round of recruiting new employees next month.
The deputy prime minister for economics has announced that 80,000 more people will be hired by public agencies for posts such as etiquette instructors and cultural tour guides. The chairman of Our Open Party, the de facto government party, declared that he would submit a bill for increasing employment by state-run businesses and publicly urged the opposition parties to cooperate in this effort to create new jobs.
If only the government starts to create news jobs, nothing would be too difficult. Let us pass a law on increasing employment by state-run businesses, let the government pay for the recruiting of interns by foreign businesses in Korea and let us make the distribution of jobs obligatory for private businesses. Why don’t we just raise taxes and issue more bonds so that the government can employ everyone? If we really took such measures, we would drag the international competitiveness of our businesses to the ground and the national economy would be broken. By that time, all our foreign relations would be in shambles and we would have turned into a state-controlled economy.
It was an appropriate start for the president to choose creating jobs as his primary national policy at the beginning of the year. But this ambition is not as easy to achieve as it might sound. Policies driven by ignorance about the economy and political purposes could even bring about more disaster and have to be strongly cautioned against.
First, the government should change the phrase “creating jobs.” Jobs and the economy are not something that the government can plan.
Earlier, the Kim Dae-jung administration encouraged credit card use under the slogan “creating the economy.” Domestic demand soared immediately with the furious issuing of credit cards, and this helped Roh Moo-hyun, the successor of Kim Dae-jung, get elected.
Less than a year later, however, the unemployment situation is still serious, and there are now over 4 million credit delinquents holding back the Korean economy. The price for this mistaken government policy is being paid by the people through their taxes and unemployment, while the main culprits have long since disappeared.
The first chapter of government employment policies should start with the understanding that real jobs are only created through the market. If the government tries to force businesses to give full-time employment to their part-time employees, the businesses will simply not employ any part-timers. If the government tries to overprotect female workers, fewer companies will want to hire women.
If the government imposes low-paid interns on businesses, businesses won’t hire regular employees. The more restrictions placed on companies in their decisions to hire people, the more unemployed people out on the streets.
The “Social Pact on Creating Jobs” or the president personally asking the owners of large business groups to invest more won’t work as the main unemployment policy. Employment and investment are not goals to be achieved through consulting and negotiating with businesses.
Businesses need to make profits, and they invest and hire more people only when it is profitable to do so. Businesses that create more jobs than necessary as a means of “social volunteer work” or have any other such non-competitive thoughts would quickly go broke and dump more unemployed people into the streets. This is a principle of the market economy.
The best thing we can ask of the government is to simply not destroy that natural process in which jobs are created. Those who break the law must be punished accordingly, while the government’s overtly pro-labor mediation should stop. The government should not prolong these uncertain market conditions by changing its stance so frequently.
The president has vowed “to deal with illegal actions firmly with law and principle.” To show that he means what he says at the appropriate time would be the fastest way to recovering trust.

* The writer is a professor of economics at Chung-Ang University. Translation by the JoongAng Daily staff.

by Kim Young-bong