A dangerous way to create jobs

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A dangerous way to create jobs

Seoul Mayor Park Won-soon has announced that he plans to establish a 300 billion won ($268 million) “social investment fund” by 2014 through contributions of 100 billion won each year, half from the city coffers and half from private companies. He said the funds will be used for job creation measures for young people, the unemployed and people in the low-income bracket.

Park seems to be confident that he will be able to set up the fund, given his unrivaled reputation for seeking donations from private enterprises. Critics, however, have mocked the idea that his career has been built on donations from others, and it is disappointing to see that the job creation measures he fervently championed during his campaign will be based primarily on handouts from private companies.

Park is convinced that private businesses will voluntarily contribute money to the fund. In Korea, we are familiar with the situation in which the mayors of small- and medium-sized cities and the heads of county offices wield a great deal of power and influence over the private companies that are within their boundaries. Not many will reject such requests from local governments, which have the power to authorize business and which control the budget.

As a result, if they want to avoid potential disadvantages with large-scale construction projects, for example, they cannot dismiss the Seoul mayor’s request. It is likely that companies regard donations as a form of insurance protecting their interests. The mayor’s plan, therefore, can be compared to a form of taxation.

It is also unclear how many jobs Park will be able to create through the fund, particularly given the apparent limitations of government-led campaigns. That’s why this will likely end up as an exhibitionist project to polish his achievements as mayor.

It is up to companies to create jobs. Jobs can be created when local governments try to help companies do business more effectively through administrative support, for instance. Even if private enterprises are willing to pay a total of 150 billion won, their contributions are still not free as they must make up the financial loss by other means and the cost will eventually have to be borne by taxpayers.

Park is trying to push ahead with a wide array of reformist pledges - including expansion of the free school lunch program and reducing college tuition. But we are worried that he is mistaking himself for a kind of Santa Claus who extends a helping hand to the weak no matter the price.
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