Route to a financial solutionTransportation requirements should be adjusted according to your travel destination. Knowing where you’re heading should be the beginning of everything.
The Korean economy may be looking straight into a long tunnel of structural slowdown. The Bank of Korea revised its down growth estimate for this year and the next. The economy’s growth estimate was downgraded from 2.8 percent to 2.7 percent for this year and 3.3 percent to 3.2 percent for 2016. The central bank cited sluggish economies in emerging category, including China. Five days later China reported its third quarter economy grew at 6.9 percent, the lowest in six and half years. Beijing has failed to maintain the economy above 7 percent.
Hiring and income conditions will inevitably worsen if the economy moves at a snail’s pace. People need to work longer because they live longer and need more money. Authorities are challenged with the task of improving job and income levels during the slowdown. To make the most of limited resources, they must set specific job and income targets. How does one set a good target on hiring and income?
First, the statistics backing the target must be reliable. The data must reflect reality. Take unemployment data for example; the jobless rate was 3.2 percent as of September and 7.9 percent for people aged between 15 and 29. Few can relate to the data, especially the young who cannot find decent jobs. Upon graduation, some young Koreans go into self-exile after one job-seeking failure after another.
The unemployment data does not seem credible because it overlooks an important factor - those who have stopped looking for a job. The jobless rate estimates people without jobs among those aged above 15 are considered able to work. Those who have quit looking for jobs are not counted as working population. If more people give up trying to find jobs, the unemployment data becomes less credible. To more accurately understand the hiring situation and set necessary employment targets, one needs to look at the employment data at the same time.
The employment data is the number of people with jobs aged 15 and above. The total employment rate so far stands at 60.9 percent and 41.7 percent for the younger age group. The data is not entirely accurate because it includes anyone working more than an hour a week. Still it is more credible than the unemployment data. The government was right to set a national agenda to achieve an employment rate of 70 percent by 2017.
Second, the target must be simple and meaningful. To motivate economic players, they must be able to understand the figures clearly.
To reflect the level of individual income in a country, per capita gross domestic product or gross national income is often cited. According to the Bank of Korea, the country’s per capita GNI stood at $28,180 as of 2014. Again, few Koreans would hardly relate to this figure. The per capita GNI is a mean value and does not reflect income distribution. Income distribution must not be skewed. If the income gap is wide, the data may not be realistic.
If income is polarized, the median income can be a better barometer. The median income measures the income of households that are at the middle of the upper and lower half. According to the national statistical office, the mean, or average, income of the median group in 2014 was 1,878,941 won ($1,666) per month and 22,547,292 won for the full year. The median income average should be the data authorities base when they draw up policies.
Efforts to boost average income and bolster the base in the median income group can help increase the middle class. The government referred to the median income category when selecting candidates eligible for the basic monthly allowances that began in July.
To increase employment and income levels and bolster the middle class, the data and policy targets must be realistic, simple, and meaningful so that the goal can be reached.
Translation by the Korea JoongAng Daily staff
JoongAng Ilbo, Oct. 24, Page 27
* The author is CEO of KORAMCO Fund and co-author of “The Aging Republic of Korea.”