No more trickle-down effect

The Korean Finance Industry Workers’ Union kicked off a general strike last week to protest the introduction of performance-based pay, which the government wants to implement next year. [SHIN IN-SEOP]

On September 27, Choi Eun-young, former chairwoman of Hanjin Shipping, knelt and cried during a parliamentary hearing where she appeared as a witness. She had been criticized for showing “crocodile tears” as she was seen laughing with former Korea Development Bank chairman Min Euoo-sung right after she wept at the hearing on September 9.

On every question from the lawmakers, she kept her head down and repeated, “I am sorry.” But she flat out said that she had no intention of coughing up her personal assets. If Choi manages to get through this critical moment, she will be able to defend her personal wealth. The prosecutor’s investigation is not likely to happen as the warrant was denied. In the end, the victims will be the crew members who have already been fired or are wandering around the sea like refugees.

Minjoo Party lawmaker Choi Woon-youl is an economist who championed conglomerate-oriented growth when he was a professor at Sogang University. But lately, he advocates raising corporate tax on big corporations as the “trickle-down effect” of jobs and incomes growing as a result of corporate expansion has subsided.

His position may have changed as he is now an opposition lawmaker. However, he seems sincere. In August, 2015, long before he turned to political career, he made a retrospective reflection in a lecture. He said he had to reconsider his belief as he witnessed the aggravating social disparity and students struggling to find a job.

Choi proposed to cut the wages of all public servants in the first grade and higher, including the president, executives at major corporations and regular employees at conglomerates. Instead, the number of regular jobs and the wages for irregular workers can be raised. It is a courageous proposal for an opposition lawmaker who seeks support from labor unions at major corporations. But his idea is hardly plausible.

The unions of the major companies are not likely to concede. Currently, Hyundai Motors, railway and subway workers’ unions are on strike. On September 23, the union members of a state-run bank that is largely responsible for the Daewoo Shipbuilding and Hanjin Shipping’s insolvency started a walkout opposing a performance-based salary system. At the demonstration rally, popular musicians like Norajo and Bada performed.
In many ways, Korea is following the path that Japan has walked. Perhaps, it is the fateful outcome of benchmarking Japan’s economic development strategy, where large corporations lead exports. The problem is that there are signs of betting infected with the “Japanese disease,” which represent the structural pathological phenomena. Keio University economics professor Masaru Kaneko made an interesting analysis on Japanese economics. He coauthored “Japanese Disease” with Professor Tatsuhiko Kodama at Tokyo University’s Advanced Science and Technology Research Center last year.

The book analyzes problems of Japanese economy from the perspective of economics and life science. They argue that Japan has contracted super bacteria and no antibiotic works. They criticized that Abenomics, releasing money to boost the stock prices of large corporations and revive the economy, is like a drug that brings temporary relief from pain.

There are different views on Abenomics in Japan and in Korea. It certainly had the positive effect of bringing vitality to the Japanese economy as college graduates are almost fully employed. However, the actual wage of the workers has declined. The International Monetary Fund warned that the initial traction has been lost, and if Abenomics continues longer, it could lead to a financial crisis. The success and failure of Abenomics depends on how much of the money released to the major companies flows to the average citizens.

Starting next year, the working age population will start to decrease, but there are no signs of improvements in youth employment.

A country where the young people have no dream has no future. Unless restructuring and reform bring about the sharing of pain with major shareholders and established unions, no prescription will work. Will Korea be infected with the Japanese disease and be hopelessly trapped in prolonged slump?

JoongAng Ilbo, Sept. 29, Page 32

*The author is the planning editor of JoongAng Sunday.

Cheong Chul-gun