Time to change the coursePresident Moon Jae-in finally got around to examining deteriorating household income by chairing a cabinet meeting on the issue. Policymakers at the Blue House have trotted out radical measures to inflate income for the working class over a short period by pushing up the hourly minimum wage to 10,000 won ($9.30) within three years, converting irregular positions to permanent payroll and shortening legal work hours. Those actions were based on the income-led growth theory that assumes increased household income would encourage consumption and help spur corporate investment and to put the economy in a growth cycle.
But the theory in practice wreaked havoc on the economy. The gap between the top and bottom 20 percent widened to near six times, the worst since data was collected in 2003. The disposable income disparity between the top and bottom 10 percent also was similarly wide.
Employment data is also at its worst level. The year-on-year gain in the number of people employed, which averaged 300,000 last year, has hovered at slightly above 100,000 since February. The wholesale, retail, restaurant and lodging industries that usually hire employees on an irregular basis shed 90,000 jobs last year. The policy, designed to increase wages for the low-income and working class, is worsening their lives by taking away their jobs.
But the Blue House remains stubborn. In a cabinet meeting, Moon said it is not wise to evaluate policy effects based on short-term results. His chief secretary on jobs said it was not easy to increase jobs due to the thinning working population. Deputy Prime Minister Kim Dong-yeon merely said that the government was closely examining the areas in which income disparities have worsened. Regardless of sprawling problems, the administration is intent on keeping alive the so-called J-nomics, Moon’s progressive economic policy that offers makeshift fixes like subsidies to employers to sustain jobs and fiscal spending to increase jobs for the young.
Policymakers must turn their attention to fundamental measures of strengthening industrial competitiveness. They must stop this experiment with the antimarket theory of artificially upping income when business is slow. Companies won’t be eager to invest and hire amid mounting pressure on their costs. Korea is lagging behind China and other developed economies in the transition to the fourth industrial revolution. The Blue House must steer policy in the right direction. It must remove regulations and encourage companies to nurture engines for new growth. The economy can’t be saved without a turn in policy.
JoongAng Ilbo, May 30, Page 30