Heed the warningsLee Jung-woo, professor emeritus of Kyungpook National University and former policy chief for President Roh Moo-hyun, likened jobs to a carriage led by a horse called economic growth. A carriage moves when the horse pulls it. It therefore cannot come before it, he said at an economics forum held at Kangwon National University on Feb. 1. Income and jobs are the fruits of economic growth, not the cause.
The textbook theory surprisingly came from the architect of the economic policy for the former liberal president under whom President Moon Jae-in served as the chief of staff. Lee in theory backs Moon’s policy focus of bolstering income for economic growth, but disapproved of details such as government subsidies to implement the minimum wage hike.
Joo Sang-young, another liberal professor of Konkuk University who supported the income-led growth concept, also advised moderation in the administration’s policy to push up the minimum wage to 10,000 won ($9.20) within the next three years. Joo headed the macroeconomics division in the presidential advisory board that set the guidance for the new government’s economic policy as a kind of transitional team.
The government’s policy on wages and labor drew harsher criticism from mainstream economists. Cho Jang-ok, professor emeritus of Sogang University, warned that a sharp minimum wage hike and cut in working hours will worsen rigidity in the labor market and undermine labor input and capital productivity to push the economy into recession. He criticized the government for neglecting more the urgent tasks of removing regulations and reforming the labor and education system to upgrade productivity. If a small-scale economy like Korea’s wastes resources, its mid- and long-term growth capabilities will weaken, he warned.
The government, which has been pushing ahead with steep increases in the minimum wage and other policies to be faithful to the president’ campaign promise, must pay heed to the experts’ advice and assess the damages before it is too late. It also must stop with meddlesome policy making that upsets market principles and mechanisms.
They must not turn a deaf ear to economists’ warnings that the presidential team has been taking the economy too lightly.
JoongAng Ilbo, Feb. 3, Page 30