Gov’t unveils W11.2 trillion plan to boost jobs
This budget, which will be submitted to the National Assembly for approval on Wednesday, is expected to create at least 110,000 jobs, with 86,000 positions in the public sector.
The government has created a supplementary budget of more than 10 trillion won for three consecutive years. In 2015, it created a 11.6 trillion won supplementary budget and one for 11 trillion won last year in hopes of boosting the stagnant economy.
Government officials, however, stressed that the major difference between this year’s budget, which is the first under the new Moon administration, and the previous two budgets is that this one was created solely for the purpose of job opportunities.
“Unless there was a special decisive decision, it would have been difficult to improve [the youth unemployment situation] as the unemployment rate of youth as of April has risen to 11.2 percent and the actual number of young people out of jobs reaching 1.2 million,” said Park Chun-sup, head of the Finance Ministry’s budget hearing department.
“Although we have come up with a budget plan in tackling unemployment, this is the first time that we have created a supplementary budget solely on the purpose of creating jobs.”
When breaking down the budget, the central government will spend 7.7 trillion won while the rest will be allocated to supporting local government.
Among the 7.7 trillion won that the central government will be spending, 4.2 trillion won will be used directly for hiring public servants. Another 1.2 trillion won will be used to improve working conditions, like doubling the first three months of wages for people taking parental leave, doubling the number of public day care centers to 360, and increasing the amount that a new employee of an SME could save up on a government program from 12 million won to 16 million won.
The program that kicked off in July last year is targeted at helping young people working at SMEs create an investment pool of 12 million won by saving 125,000 won every month for two years. At the end of the program the government matches the savings with 6 million won and the company with 3 million won. As of end of March, more than 13,800 people are participating.
The government estimated 86,000 jobs will be created both in the public and private sectors. Of that total, 54,600 jobs will come from social welfare, including 33,400 jobs taking care of senior citizens, 12,000 public servant positions and 15,000 jobs in small and midsize companies.
A total of 7,500 are expected to be hired as local public servants including firefighters, who also act as emergency officers and 800 or more kindergarten teachers.
In the private sector, the government will subsidize some of the small and midsize companies that hire new employees. Under the program the government will provide as much as 20 million won for the next three years to one of the three employees that a small and midsize company hires.
Also, the government will establish a 300 million won fund that will help SMEs that are financially struggling, 500 billion won to finance young people who want to start their own businesses and 400 billion won that will finance the development of technologies related to the fourth industrial revolution.
The government estimated that 24,000 jobs will be created indirectly through several job programs, such as training and loans for starting businesses.
The supplementary budget is the first step in President Moon’s promise of creating 810,000 jobs during his term.
The Moon administration has strongly believed that bolstering the job market is the quintessential step in securing sustainable growth that will revitalize the economy.
“We couldn’t leave the current job market and unemployment situation, which is close to a disaster the way it is while waiting for a long-term counter measure on [reforming] the structure,” said Jang Ha-sung, the Blue House’s policy adviser. “We’re at a point where turning the people’s quality of life in the short term is necessary.
“We believe the supplementary budget will be effective and time appropriate.”
The government has high expectations from the supplementary budget as it expects it would contribute to raising the nation’s economic growth an additional 0.2 percentage points. The government forecast this year that the economy will expand 2.6 percent. If so, the additional budget will push up the growth rate to 2.8 percent. But as the economy has been showing signs of recovery better than earlier projections, the government is positive that the economy will reach a growth rate of 3 percent or higher by the end of this year.
In fact, the Bank of Korea last week said that the economy grew 1.1 percent in the first three months of this year, which was faster than the earlier forecast of 0.9 percent.
If the economy reaches 3 percent growth, it would be the first in three years. The last time it grew that much was in 2014 at 3.3 percent.
The central bank will be announcing its revised outlook next month.
However, Moon’s supplementary budget plan will likely face difficulties in making it through the National Assembly, as the opposition parties have been rejecting the plan of creating jobs with taxpayers’ money.
The government has stressed that the supplementary budget is created with excess taxes collected last year and the additional profit made from managing funds instead of issuing government bonds, which are debt.
Last year, the government collected 242.6 trillion won in taxes, 9.8 trillion won more than its initial target of 232.7 trillion won.
“This year, we expect national debt to amount to 683 trillion won and we see the national debt rate to be high and for that reason we have decided to pursue the supplementary budget without increasing debt while maintaining the fiscal soundness as much as possible,” said Park of the Finance Ministry’s budget office.
Yet there are still concerns over the need of pouring additional taxpayers’ money to sustain the new public servant jobs.
Unlike the past supplementary budgets, which were mostly spent on onetime projects that didn’t need a continuum of additional funding on the same projects, Moon’s budget is likely to inject additional government spending to cover the wages of newly hired public servants.
The Finance Ministry estimated the government will spend 120 billion won annually on the new workers. That figure is expected to further expand, as the amount covers only starting salaries.
Additionally Moon has promised to hire 174,000 public servants for the next five years.
“After the three parties - Liberty Korea Party, People’s Party and the Bareun Party - held a meeting, we have decided to oppose to using the people’s taxes in creating public jobs including public servants,” said Lee Hyun-jae, the Liberty Korea Party policy chief, at the end of last month. “President Moon’s populist campaign promises will realize into reckless taxation bombs or turn into national debt for future generations.”
Some analysts agree that while unemployment is a serious problem that needs immediate attention, solving the problem by increasing the number of public servants will add a financial burden for the next 30 years.
BY LEE HO-JEONG [email@example.com]