Government tries propping up incomes
They included lowering the minimum 0.8 percent credit card commission charged to vendors to zero for businesses with revenues of less than 300 million won ($264,877) a year. The measures were announced the same day the government lowered its economic growth forecast from 3 percent to 2.9 percent amid deepening trade conflict between the United States and China, Korea’s two largest export markets. Earlier this month, the Bank of Korea lowered its outlook to 2.9 percent.
One of the goals of the measures is to help senior citizens find jobs or get more welfare, particularly the relatively poor, by raising the basic pension.
Starting next year, the government will help 600,000 senior citizens find jobs, which is 80,000 more than this year. The government will be creating 10,000 social service jobs, such as academic advisers and assistants in facilities that treat people with disabilities.
Monthly salaries of up to 540,000 won will be guaranteed in the social service jobs for working a maximum of 60 hours a week. In the second half of this year, the government will be helping seniors living in industrial crisis areas like Gunsan in North Jeolla, where the local economy has been slammed by the restructuring of the automotive and shipbuilding industries.
A study by Statistics Korea in May found that the income gap between the top 20 percent and the lower 20 percent has widened, with the bottom 20 percent seeing the sharpest drop since related data has been compiled since 2003.
The average income of the bottom 20 percent fell 8 percent. In the bottom 20 percent, 43.2 percent are people over the age of 70.
The government will raise the basic pension paid to seniors from 210,000 won per month to 250,000 won starting in September. The basic pension will be raised to 300,000 won next year, which has been pushed up from 2022.
Some 1.5 million seniors are expected to benefit from the hike in the basic pension. Other welfare measures include easing standards to qualify for receiving government subsidies for minimum living expenses for lower income households starting next year, as well as allowing people over the age of 60 to subscribe to housing pensions for jeonse, or long-term deposit apartments.
To support self-employed entrepreneurs, like restaurant and convenience store owners, the government will lower credit card commissions they have to pay to below 1 percent.
For businesses with revenues of less than 300 million won a year, the current 0.8 percent minimum rate will be lowered to zero, while the 1.3 percent commission paid by businesses with revenues between 300 million won and 500 million won will be lowered to 0.3 percent. Companies with revenues of more than 500 million won will see their 2.5 percent commission downsized to 0.5 percent.
Businessmen renting space with deposits of less than 600 million will be able to renew leases for ten years, double the current five years.
To boost the domestic economy, the government is lowering the individual consumption tax imposed on cars to encourage more people to upgrade their old vehicles to new vehicles through the end of this year.
The tax rate will be lowered from 5 percent to 3.5 percent with a maximum limit of 1 million won.
According to the Finance Ministry, once the rate is lowered, people will be able to purchase a 20 million won vehicle at a savings of 430,000 won. For a vehicle with a sticker price of 50 million won, savings will amount to 1.07 million won.
In 2015, the government also lowered the individual consumption tax to 3.5 percent, which resulted in boosting monthly vehicle sales by between 10,000 and 14,000 units.
“Despite our external economic expansion and our efforts to manage the macroeconomy, we have found that businesses are very desperate,” Finance Minister Kim Dong-yeon said Wednesday. He said the economic situation in the future won’t be easy especially for small entrepreneurs.
The Finance Minister said the measures were practical and aimed to strengthen Korea’s social safety net while recognizing the changes taking places in Korea’s demographics and industrial structure.
BY LEE HO-JEONG [firstname.lastname@example.org]