Cruelty of good intentions
The author is the chief editor of the JoongAng Ilbo.
The patient is dying even after the surgeon claimed the operation went well. So it is going with the Moon Jae-in administration’s income-led growth economic policy and its steep hikes in the hourly minimum wage hike. A policy aimed at helping the relatively less well off has ended up hurting them. Over 6 million small businesses are suffering from the 29 percent increase in the minimum wage over the past two years.
A minimum wage was adopted in the first place to ensure a minimum level of earnings for the bottom tier of workers. Under the liberal government, the policy has become something sacred. An employer who underpays can go to jail. The increases were uniformly applied to all types of business regardless of their nature. The rapid wage hike is a Procrustean bed. In Greek myth, Procrustes was a bandit who stretched or amputated travelers’ limbs to make them fit the length of his bed. Should a doctor sacrifice a patient to prove his surgical skill? Charlie Chaplin said, “Life is a tragedy when seen in close-up, but a comedy in long-shot.”
It is humane to pay the poor more. The idea was to stimulate consumption to eventually boost investment and production. South Korea is at the bottom among the Organization for Economic Cooperation and Development (OECD) members in its fiscal spending on easing income disparities. It should do more to increase wages of the lower-income class. The major shortcoming in the policy of raising the minimum wage is that authorities have not paid attention to the people who have to pay — mom-and-pop shopkeepers.
Despite repeated pleas and even threats from shopkeepers to take collective action, Employment and Labor Minister Kim Young-joo upheld the Minimum Wage Commission’s decision to raise the wage for next year by another 10.9 percent following this year’s 16.4 percent jump. But is this just? And if just, is it wise? Policymakers need flexibility to respond to needs of the time by bending their principles.
The minimum wage policy itself is innocent. Upon meeting President Moon for the first time last year, Christine Lagarde, managing director of the International Monetary Fund, agreed that a higher minimum wage can stimulate consumer spending. She also advised discretion because too rapid an increase can put a strain on parts of the economy. She stressed that change can be a good thing, but should come in respect to efficiency.
Avid anti-communist Rhee also appointed a former communist, Cho Bong-am, as minister of agriculture to spearhead land reform. Under the principle of paid-distribution, farmers were able to claim the earnings from their farm yields. The leader of Hanmindang, a far-right party, persuaded landlords to surrender parts of their land. The left and right became united for the common goal of planting the seed of equality in the fledgling nation.
The result was astounding. Kim Il Sung, the founding leader of North Korea, invaded the South upon a tip from a spy that the South could be easily conquered. But farmers stood firm and fought back with their lives. The land reforms that started three months prior to the breakout of war had brought down the long-held feudal hierarchy and given the grass-roots a taste of ownership and the rewards of hard work. Land reform became the primary drive in the country’s industrialization and its rags-to-riches transition.
The Moon administration’s policy to increase the minimum wage to narrow the income gap is as benign as the purpose of Rhee’s land reforms. But the means have been crude, hurried and cruel. If mom and pop shops can’t afford the higher wage, they will have to fire their help. And then everyone will suffer, including the people the policy was created to benefit: the person working for minimum wage. It’s a downward spiral started with a good intention.
Land and wage reforms are central to a fair society over the long run. Today’s Korea cannot be compared to an agricultural society in the 1950s in terms of its complexity and diversity. A major policy like wage hikes that has broad repercussions on the entire society should have been implemented after soliciting differing views and carried out in a way that respects the differences among regions and types of businesses. If the process has not been fair, the result cannot be equal or just. The minimum wage experiment must stop before it causes more casualties and lasting damage to our society.
JoongAng Ilbo, Aug. 13, Pae 31