Where good intentions leadIt is common sense for a driver to slow down in perilous weather conditions and when visibility on a road is low. It is foolish — potentially fatally so — to keep up the speed in such conditions.
The driving of an economy is no different. The Blue House is trying its best to maintain that it is way too early to jump to conclusions about the effects of this year’s rise in the minimum wage, a signature policy of the Moon Jae-in administration.
Deputy Prime Minister for the Economy Kim Dong-yeon proposed moderation in the pace of raising the minimum wage toward the goal of 10,000 won ($9.40) within three years, arguing that higher prices — in this case, wages — inevitably affect demand, or hiring.
The state-run Korea Development Institute (KDI) released a report projecting that hiring could be reduced by up to 84,000 jobs this year as a result of the spike in the minimum wage.
Lee Sang-heon, coordinator for research and policy at the International Labor Organization, criticized the state think tank for the “ridiculous mistake” of referring to irrelevant overseas data to argue about the damage of wage increases to employment.
Lee, a champion of Moon’s wage-led economic growth theory, said the impact of the higher minimum wage cannot be judged from present conditions. Regardless of the justice in the theory, whether the policy — increasing the minimum wage — is right for the economy is questionable.
To pursue a policy to find out exactly where it leads is highly risky and reckless. The administration is insisting on the policy in spite of evidence of unintended consequences.
The president’s argument that 90 percent of the people believe in the positive effect of the minimum wage hike underscores the naïve and obsessive pursuit of the policy. And what he bases such an optimistic view on is entirely unclear. The KDI advised that policy must be based on strong grounds. Otherwise, the motive behind a policy drive can be legitimately questioned.
A reduction in the workweek starting next month could become another dangerous experiment with well-intended economic policies. Companies are confused. Yet the government has not come up with guidelines.
Employment and Labor Minister Kim Young-joo claimed everything has been prepared to launch the new, shortened workweek. Moderation can be exercised in the execution, she added.
The economy should not be used as a testing ground. Regardless of good intentions, hastily arranged polices like the hike in the minimum wage and shortening of the workweek can harm the economy and put a dent in public finances.
JoongAng Sunday, June 9, Page 34