Tough times for 40-somethings
The author is an editorial writer of the JoongAng Ilbo.
No presidential race has had so many impromptu campaign pledges as this one. When opposition People Power Party (PPP) presidential candidate Yoon Suk-yeol vowed to abolish the Ministry of Gender Equality and Family and raise monthly salaries for military conscripts to 2 million won ($1,670), rival Lee Jae-myung from the ruling Democratic Party (DP) promised state medical insurance coverage for hair-loss treatments, birth control and abortions. The contest in improvisational promises was aimed at winning over voters in their 20s, who hold the key to winning the March 9 presidential election. Such policies require a social consensus and colossal financing. They are unfeasible due to various challenges. They mostly likely will end up as promises never even attempted to be fulfilled.
It would be desirable for an election to ease the burdens of the people and bring better living standards. But more harm than good would be done to voters if various allowances promised to buy votes lead to a deterioration in public finances. Populist platforms can be pleasing for a while. But they offer one-time comfort in return for massive bills forwarded to the future generations.
If candidates wish to devise age-focused platforms, they should pay attention to voters in their 40s. I recently had a chance to get an earful from people in their 40s. They are the biggest victims of the government’s policy failures in real estate. The cost of educating their children and general living costs have skyrocketed. Apartment prices in Seoul have doubled. The Moon Jae-in administration capped supplies in the inner capital to discourage speculation and stabilize prices. It advised people not to buy homes as they would regret it since prices would go down. But the reality has been entirely the opposite.
There are three types of people in their 40s. There are those who are stripped of the chance of having a home because they blindly followed the government’s advice and put off a home purchase. Then there those who used all their means to borrow money to the maximum — 300 million to 400 million won — to buy an apartment. Lastly, there are those who have turned to shares and cryptocurrency as they could no longer afford a space to live. The phenomenon goes across age groups, but is most widely shared among people in their 40s.
All of them are distressed. The first group live in a sense of deprivation with hopelessness over home ownership. The second would have been briefly happy about the appreciation in the home they purchased. But they now dread a spike in interest rates and devaluation of home prices. They were able to borrow to the limit when loan regulations were loose and interest rates were in zero territory. The elders are more discreet in borrowing money as they went through the period of high interest rates. But the younger generation was bolder in borrowing money from commercial banks.
When loan regulations were tightened to contain an overheated asset market, borrowers sought non-banking lenders charging higher interest rates. When the government lowered the loan-to-value (LTV) ratio to 40 percent to contain what it perceived as speculative home buying, people turned to loans based on their credit. Loan rates from online lender Kakaobank shot up to 10 percent. When home prices fall, their pain could get really bad. The younger generation in Japan also was caught in the trap when asset prices crashed due to the bubble bursting in the 1990s.
Campaign promises targeting the trees instead of the forest are bad. People in their 40s are as hard-up as their counterparts in their 20s. They were the strongest supporters of Moon. But they gained little from his time in office. Various policies incongruent with free market principles have stolen jobs from the age group. The employment count among them has been declining throughout the last five years under Moon. The future is equally dim for their elders.
Instead of vying for fractional votes, presidential candidates should compete on universal platforms such as promotion of innovations for sustainable growth. Seeking a benign cycle in the economy can best help people of all ages. A president with such a vision must be elected four weeks from now.