It all depends on labor reform
In June, Byeong Yang-kyoon, former Blue House director of policy coordination for the Roh Moo-hyun administration, published “Transition of Economic Philosophy.” He wrote, “It is Korea’s solemn reality that free manifestation of creative and innovative entrepreneurship cannot be expected.”
In the Moon Jae-in administration, income-driven growth is promoted, but it may not be sustainable as the policy redistributes government finance and the wealth of companies. To complement the policy, innovative growth is also pursued. If income-driven growth focuses on demand, innovative growth is a supply-oriented strategy.
The fourth industrial revolution, creative economy and innovative growth all fall into the category of applying and integrating new technologies such as AI and Internet of Things with manufacturing, services, bio, medical and environmental fields. The goal is nurturing technology start-ups.
Innovation comes from entrepreneurs. The government needs to create an environment that allows for innovation. The foundation is freedom. True innovation cannot occur when there are many restrictions.
The Ministry of Strategy and Finance’s blog introduced a Korean golden triangle economic model of growth, welfare and employment. It is a modified version of Denmark’s golden triangle and focuses on a flexible labor market, reinforced social security network and more active vocational education. Firing an employee gets easier, but fired workers are paid up to 90 percent of the salary they earned during employment. Taxpayers may have to pay considerably more tax.
Byun argued that Joseph Schumpeter-style supply innovation requires four liberties, including freedom of labor. Just as employers get to fire workers easily, workers should also be able to provide their labor and skills to the company of their choice. He proposed that social security networks should be reinforced with unemployment benefits and public housing while the two-year period of converting irregular employment into regular employment and the dispatched work act should be scrapped.
The Moon Jae-in administration has been focused on pro-labor policies. At the same time, the next step should be taken towards innovative growth. The innovative growth plan that the administration is to announce next month will contain labor reform and deregulation measures. If it remains mere venture start-up assistance, it may follow the failure of former President Park Geun-hye’s creative economy.
JoongAng Ilbo, Sept. 29, Page 30
*The author is the deputy business news editor of the JoongAng Ilbo.