The path to job creation
When I asked a retiring member of the Bank of Korea’s Monetary Policy Committee about his experience a few years ago, he said, “It is regrettable that I am retiring without raising the interest rate once.” It was unexpected. Considering the economic situation at the time, raising the rate was not an option. Instead, there were calls to lower it further to boost the economy.
It was not that he thought the interest rate increase was needed at the time. He was afraid that he would be remembered within the Bank of Korea as a member who’d never increased the interest rate.
Lately, Bank of Korea Governor Lee Ju-yeol, whose term expires in March 2017, is sending signals of an interest rate hike, perhaps out of the same anxiety.
It may be easy to lower the interest rate, but raising it is much harder. It requires not only fair judgment to spot the right timing but also the drive to get through the opposition of interested parties and political pressure.
Paul Volcker, known as the “inflation fighter,” is often named one of the best Chairs of the Federal Reserve in history. In the late 1970s, he made a bold move to raise the interest rate to 20 percent, when the price went up by double digits. Farmers panicked and drove their tractors to the Fed building. Builders poured construction materials in the front yard to pressure him. But he did not budge. After the chaos, prices began to stabilize, and the heyday of the Reagan era in the 1980s was built on those stable prices.
The Moon Jae-in administration’s jobs drive has room to improve. Expanding employment in the public sector and turning irregular employees at public corporations to regular positions are not as easy as they sound. But the difficulty level would be equivalent to lowering the interest rate for the Bank of Korea.
For Moon to become the “Jobs President,” he should not avoid harder challenges. Answers can be found in Sogang University professor and key member of President Moon’s think tank Cho Yoon-je’s “Income Distribution in Korea.”
“Employment policy essentially involves the reorganization of the established interests of the workers who already have stable jobs and political structure. To improve the income distribution structure, policy direction needs to clearly focus on the vulnerable group rather than the establishment.”
One of the test-taking skills is to solve the problems you know first. When you spend too much time on hard problems, you may run out of time to do the easy ones. However, the job issue is not a test that you can pass by getting the easy questions right. Harder ones may be postponed, but they need to be solved in the end.
JoongAng Ilbo, June 28, Page 30
*The author is a deputy business and industry news editor of JTBC.