Time to make a noble retreat
The author is an editorial writer of the JoongAng Ilbo.
I briefly ran a business after I laid down my pen. I operated a newspaper printing factory for three years. The scene of printed newspapers flooding over the conveyor belt was almost like a film to me. But there was nothing romantic about it in real life, as the printing industry was on a downswing in the digital age. I had dinner with the workers in early 2004, shortly after I took charge of the factory. I can never forget their desperate faces and their pleas not to be sacked. The 230 factory workers were afraid of losing their jobs. I could only tell them I would do my best. Making promises you cannot keep is dangerous. I learned several lessons from the experience of managing a business.
First of all, money makes dignity. An employer earns respect from employees by making money from his business and ensuring their jobs. He must work toward securing more work to push up the factory operation rate, sales and profit in order to provide them with jobs. That is easier said than done. Business can be excruciatingly stressful, which made me want to give it up many times. Reducing payrolls can be tempting to every employer, particularly in times of trouble. There is a limit to sustaining a business through cost-saving and wage freezes. The simplest way to improve the balance sheet is to cut employees. However, employers must not take risks when employees’ jobs are on the line. A misjudgment can ruin a person’s life and even that of their family.
The controversy over the increases to the minimum wage brought back memories of my factory experience. Proponents preach that when the minimum wage goes up and incomes increase for wage earners, it helps prop up consumption and industrial activity to generate jobs, and a positive cycle kicks off. They argue that increasing the income of the poor fuels growth in the broader economy. They believe employers will inevitably comply with their policy direction if they are pressured to do so. But few mom-and-pop shopkeepers, small merchants and managers of small or mid-sized enterprises would agree.
To them, the new hourly minimum wage of 8,350 won ($7.44), which will go into effect on Jan. 1 next year, spells doom for their business. They are facing a challenge to come up with inventive ways to sustain their business against the odds. The economy moves on sentiment. Layoffs are an existential — not moral — issue for employers. The data that show the worst unemployment rate in 17 years and largest-ever state payouts for the unemployed are the proof.
The French Revolution remains a textbook example of how excessive government control of prices can cause an economic and social disaster. To establish a new order after toppling the monarchy, the revolutionaries, led by Maximilien Robespierre, ruled through a reign of terror. To cement their power and gain favor from the working class, the National Constituent Assembly imposed price controls on staple food. Prices of milk were capped at half of pre-revolution levels. This led to panicked hoarding and undersupply that ended up inflating prices to excruciating levels. At the end, Robespierre was executed the same way the monarch was. The Moon Jae-in administration’s wage-setting experiment has also produced the opposite effect of what it intended. Instead of increasing wages and jobs, the policy has undermined job security, inflated prices, and further hurt consumption and the economy. The policy has made life more difficult for the working class.
No one doubts the benevolent intentions of the Moon administration. Who would not feel pity for the people living in rooftop quarters during the hottest summer in 111 years without a decent fan, let alone air conditioner, or disagree with the idea of sharing some of the wealth with the poor and less fortunate? But the ideas of former activists and liberal professors do not pan out in reality. They insist that increased wages will lead to increased consumption. The government is pushing policies that are self-righteous and self-serving. The approval rating for Korea’s most popular president to date has dropped to 60 percent from nearly 80 percent partly because of public disgruntlement over his economic policies.
The biggest lesson I learned from my factory experience is to never toy with the livelihoods of workers. They rely on secure jobs. Experimenting with their jobs to prove an ideological point is insulting.
The Moon administration’s minimum wage policy, the core of its income-led growth policy, is wreaking havoc on the economy. Moon must say goodbye to his pledge to create jobs. If the direction is not corrected immediately, Moon will steer the economy into disaster. If Moon changes his course, it will be remembered as a noble retreat.
JoongAng Ilbo, Aug. 3, Page 31