[Viewpoint] Good intentions aren’t good enoughMany believe that the current economic crisis evinces the flaws of a market economy and economic liberalism. However, no matter how serious a crisis may be, it cannot be evidence of the failure of the market economy system. Economic slowdowns or depressions have been traits of market economies and they will continue to be so in the future.
A market economy is still the best possible system and impulsive acts to reduce freedom in the market are dangerous. As people go about making profits from transactions in the market, people conduct affairs voluntarily. Therefore, even though the results of their affairs may not always be fruitful or fair, it is still wise to leave transactions to be carried out freely.
In general, the government does not have the knowledge, resources or political will required to adjust the results of market activities for the better. Since people’s situations and needs vary a great deal, the government’s indiscriminate interference and regulations usually make the situation worse.
Now we are confirming this in a painful way over the issue of irregular workers.
Few employers would like to discriminate against parts of their workforce intentionally. Companies came up with irregular workers as a form of employment because of the unrealistic labor act and militant labor unions.
After hiring a person, the employer must pay more than the employee is worth and it is very difficult to fire him. Hiring irregular workers is the employers’ strategy to make a detour around the labor act and labor unions.
A resolution would be to correct the unrealistic labor act and punish labor unions that conduct illegal acts, in order to make the labor market flexible.
But none of the administrations have had the political will to do so. Thus, a reasonable policy for now will be to leave irregular workers, a device that the market has created, as they are.
However, people who were full of good intentions but lacked any knowledge of the situation argued that such an unfair arrangement could not be left as it was. They established a law that mandated employers make irregular workers who have been employed for more than two years full-time workers.
As predicted, instead of renewing the contracts, employers started to fire irregular workers before they reached two years of employment.
It is not unusual to find examples and cases where a government that has good intentions, but lacks the proper knowledge, interferes in the market, only to worsen the situation.
The most urgent issue that requires our attention now is the minimum wage. The purpose of a minimum wage standard is to improve workers’ standards of living by setting the minimum level of hourly wages that employers must pay their employees.
In reality, this makes marginal work disappear, instead of raising wages. There are quite a few marginal jobs that offer wages that people without any specific skills are willing to take.
If such jobs disappear because of a minimum wage standard, poor people will suffer immediately.
If a wage standard is too low, the standard is useless. If too high, work disappears, making poor people even poorer. Therefore, it is very important to have a proper standard for wages.
It isn’t easy, however. A labor market is not a standardized market, but it is divided into different sub-markets. Therefore, standards for different sub-markets must be set.
Who can set such standards?
Naturally, as mainstream economists pointed out, a minimum wage standard did not help the poor but often worsened the situation. The standard originally had a negative impact on teenagers’ employment.
Recently, as societies are aging, the standard’s side effect on elderly citizens’ employment has emerged as an issue. Because elderly citizens are not particularly productive, and they value the act of working itself, they willingly take jobs that provide low incomes. A minimum wage standard is a disaster for them.
Recently, the Minimum Wage Council has set a minimum wage for next year at 4,110 won ($3.23), a 2.75 percent increase from this year. How many senior citizens without special skills can be productive enough to earn that much money?
The acts on irregular workers and a minimum wage standard were born of similar philosophies. The only difference is that the former’s damage is visible immediately, as it causes people to lose their jobs, while the latter’s damage is not very visible, as it makes jobs disappear even before people can take them.
The two measures must be abolished as soon as possible, as sloppy interference into the market only worsens matters.
There are few things more dangerous than good intentions that lack proper knowledge. As an old Western saying goes, the road to hell is paved with good intentions.
*The writer is a novelist. Translation by the JoongAng Daily staff.
by Bok Koh-ill