Stubbornness can’t create jobs
*The author is a senior writer on employment and labor at the JoongAng Ilbo.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists,” British economist Joan Robinson said. Those sharp words of wisdom from the rebel economist could not be better applied than to describe today’s contradictory economic policymakers in Korea. Theories are bent to meet and justify policies.
Kim Dong-yeon, deputy prime minister for the economy and finance minister, called the May jobs data “shocking.” His comment raised hopes for a return to common sense — and a revisiting of the government’s experimental economic agenda. The meeting in which he made the remark was also attended by the senior presidential secretary for jobs.
As soon as the emergency meeting was over, Lee Ho-seung, secretary for job planning at the Blue House, blamed other factors for the woeful jobs data. “We had unusually frequent downpours in May,” he said. He also pointed to a broader factor — a thinning working population resulting from the rapid aging of Korean society and a low birth rate. Employment conditions and data have sharply deteriorated since the Moon Jae-in administration took office last year. Its officials are hunting for excuses in unlikely places — including the weather — to deny their economic policies are to blame.
If job numbers stay subdued in July and August, the Blue House might blame a heat wave or floods. But how can it explain why as many as 1.75 million jobseekers in their 20s and 30s have had to give up finding jobs?
The government has been giving the same lame excuse for the alarming deterioration in job conditions. It attributed it to bad weather and the lunar New Year holiday break in February. Then the government said the bad job conditions resulted from the holding of state exams for civil service applicants. It’s as if the administration is working at defending something else about its economic policy other than the economy doing well.
The government was forced to acknowledge its mistake only after the damage was done. Employment and Labor Minister Kim Young-joo had insisted that companies were well prepared to adjust to a new 52-hour workweek effective from July 1 despite repeated warnings from the media, scholars and other government offices about the lack of preparation and possible side effects of the transition. Only last week, the Blue House, government and ruling party accepted a plea from the Korean Employers Federation and decided to grant a six-month grace period by deferring any punishment for violations of the maximum 52-hour workweek to make necessary amendments according to the conditions of workplaces across the country.
The Moon administration’s policy also drew a warning from the Organization for Economic Cooperation and Development. It advised moderations in the exceptionally fast increases in the minimum wage. “Unless this [hike] is matched by higher productivity, it could push inflation above target and have a negative impact on Korea’s international competitiveness,” the OECD said in a regional report on Korea. The finding should bring chagrin to the Blue House, which has argued that the effects of the higher minimum wage were 90-percent positive. The government forced up the minimum wage this year by a whopping 16.4 percent compared to last year and has a goal of making it 10,000 won per hour ($8.95) by 2020.
Yet the Blue House remains steadfast. It claims the businesses that have been shaken by the policy change only suffered from a lack of public relations on the government’s part. It obviously does not want to change its course.
Such rigidity and narrow-sightedness will almost certainly blind policymakers. The best-known example of how evasive the human eye can be is the classic case of assigning a group of people the task of watching a video and counting passes between two basketball players. More than half of the time, they miss what is really happening in the video — a gorilla passing by.
When attention is entirely set on a certain goal, policymakers may fail to the see the signs of danger in the economy. Once wrecked, an economy is hard to rebuild. “Scarce attention or intentional blindness” are often cited as the weaknesses of populist and behavioral economics. Economic policy chasing populist goals can be no more than a visual trick.
With the steering wheel in the hands of such inattentive drivers, we are doomed. The economy will be outpaced by competitors and lose steam. The alarming signs have been everywhere — employment, foreign exchange, external and domestic demand. Many warn that the Korean economy is not slowing, but has already entered a recession. It could be headed for the same path as Japan’s.
Moon vowed a government that creates jobs. But jobs do not sprout from stubbornness. A driver should look all around instead of keeping eyes straight ahead. The government may have to change course before the Korean economy is hit hard by the invisible gorilla.
JoongAng Ilbo, June 15, Page 28