Losing our edgeConcerns are rising about the future of the Korean economy. A number of major think tanks at home and abroad are warning that our economic competitiveness is showing tangible signs of weakening. In sharp contrast with the amazing boom in Japan, where employers desire to hire as many as 500,000 foreign workers, our economy suffers its worst-ever unemployment, they point out.
The government should pay keen attention to foreign economic organizations’ growing concerns about adverse effects of the so-called income-led growth the liberal Moon Jae-in administration has been pushing. In its economic prospects for South Korea last month, the Organization for Economic Cooperation and Development (OECD) blamed the Moon administration’s push for a whopping 54 percent increase in the minimum wage during its five-year term for its gloomy forecast. It warned that if the minimum wage goes up without increases in productivity, our national competitiveness will most likely fall further. The OECD also underscored a need to raise labor productivity as South Korea’s working age population and working hours decrease from July. It advised the government to deregulate more and reform the labor market.
But the administration is reluctant to do that. Even though technological innovation and a new growth engine are desperately needed, domestic companies simply can’t do it. For instance, special bills aimed at developing the local services industry and cut regulations were submitted to the National Assembly long ago, but they were blocked by the ruling party as it argues they will benefit large companies. Another bill which allows enterprises to do business without any regulations for a certain period of time is also stuck in the legislative gridlock.
Some 57 of 100 new technologies of global start-ups are illegal in South Korea, and the country is lagging behind China in major technologies of the fourth industrial revolution. Witness the exodus from Korea. Hanwha Q Cells built a new solar cell module factory in the U.S. state of Georgia, and Hyundai Motor invested $380 million in its plant in Alabama. When companies go overseas, they can avoid protectionism and escape the hard-line labor unions back home.
All those factors contributed to the deterioration of the competitiveness of our mainstay industries. The Korea Development Institute, a state-run think tank, warned that except for semiconductors, other industries are increasingly losing their edge. The government must listen.
JoongAng Ilbo, June 1, Page 30