[VIEWPOINT]Time for a grand social pact

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[VIEWPOINT]Time for a grand social pact

Our economy is in a very difficult situation again.
At the same time, social polarization is becoming more and more serious.
The dream of building a solid middle-class society ― a goal we set when we achieved exemplary industrialization ― has disappeared, and instead our society has become polarized between rich and poor.
And the middle class continues to collapse.
The problems that our society now faces are closely related to economic difficulties, which are in turn aggravated by social and structural factors.
The problems are so complex and structural that we cannot even distinguish the sequence of cause and effect.
The problems we have at present can be listed as follows: depression of domestic spending after the bubble of spending with credit cards burst, a decline in the construction business, a blow to exports by China’s temporary restructuring policy, a surge in crude oil and international raw material prices, years of reductions in capital investments and a shortage of foreign direct investment, excessive household debts compared to gross domestic product and widened gaps between large and small businesses.
There are also problems other than the above that aggravate social polarization: insolvent credit card holders, whose numbers have more than quintupled over three years; a rise in unemployment, particularly youth unemployment that is double the total unemployment rate; a rising early retirement rate and marginalized aged labor; the world’s third-highest divorce rate; an asymmetric population structure due to the low birth rate and a relative increase in the aged population; an increase in the government’s potential financial burden arising from expanded pensions; the low efficiency of the government and the inconsistency of its policies and the inefficient and backward education system.
These are all factors that are overshadowing the competitiveness of our knowledge- and information-based society in the future.
There are close relations between economic polarization and social polarization.
Therefore, we should go back to the basics to solve these problems. Rather than resorting to popular remedies that treat only obvious symptoms, we should make prescriptions based on the root causes of the problems.
We should also respect the market and strengthen the function of the community.
When the unemployment rate rises in an open economy, the level of wages drops.
As a result, investments in education and technological development are made and new jobs are created, and manpower with new knowledge and skills is provided. In our country, this mechanism of the labor market in the open economy does not work.
As U.S. scholars of institutional labor economics point out, the two to three tiers of labor markets artificially set up in our society are blocking the market from working. The top 10 businesses in our country make 80 percent of corporate profits.
There are also three types of labor market in our society. The first type is workers with high pay, guaranteed job security and strong collective power to negotiate in a good working environment.
The second type of labor market has relatively poor working conditions and the third type is composed of temporary and daily workers, who account for almost half of the total employed workers. The segmentation of these labor markets is increasing more rapidly now than before.
The segmentation of labor markets leads to social polarization. To solve these problems, we should choose one of the following two methods.
One is an easy compulsory measure: Just turn temporary workers into regular workers.
The other is to accomplish a grand social compromise to overcome the economic crisis through six-party talks: representatives from large companies, those from workers who belong to the first type of labor market, those from small- and medium sized businesses, those from workers who belong to the second type of labor market, those from temporary workers, and the government.
In retrospect, we should have made such a great compromise when the wave of globalization began to rush in.
We should have been faithful to the principles of the market abroad and should have carried out reform at home. Even now, it is necessary to make a grand social compromise and achieve genuine reform.

* The writer is a professor of sociology at Information and Communications University.

by Lee Kak-bum
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