Still stuck in a fictitious world of statistics

Lee Sang-ryeol

The author is an editorial writer of the JoongAng Ilbo.

Korea Real Estate Board (REB) staffers testified that they had been threatened with organizational and budget cuts if they did not cooperate with the government order, according to the Board of Audit and Inspection (BAI)’s interim results of its investigation into the possibility of statistics manipulation under the former Moon Jae-in administration. The warning came from a senior official of the Ministry of Land, Infrastructure and Transport, who had summoned a member of the REB in early 2019. The staffer was instructed to underreport the rise in housing prices. It is not difficult to imagine what impact the threat from the senior official of the Land Ministry had on the REB under the ministry’s jurisdiction.

The question is why such an overbearing order was made — and if housing data was really warped as a result. According to the BAI findings, the REB was pressured by the Blue House and the Land Ministry to use an arbitrary estimate from February 2019 to June 2020 for the announcement of its weekly housing price movements even without conducting the required weekly research. In reaction, the officials under the Moon administration lambasted the results as an “audit scam” for political purposes. If the BAI lied, the officials must clear their names by proving that they did not put any pressure on the REB to distort the housing data.

The former administration’s economic policy was focused on stabilizing housing prices and inducing growth through increased income. The previous government churned out 27 sets of real estate measures, which all ended up lifting housing prices further. Under the so-called income-led growth slogan, the minimum wage jumped 16.4 percent in 2018 alone, but employment and distribution hit their worst levels.

A normal government would have soberly studied the consequences and adjusted the policy. But the progressive government drove on, based on national statistics. But the BAI finding suggests that the administration artificially lowered housing prices by massaging data and even changed the methodology of compiling income data to tweak the results in its favor.

Former President Moon Jae-in speaks at a ceremony in Seoul to commemorate the fifth year of the Sept. 19 Joint Declaration in Pyongyang. During his term, Moon praised his administration for effectively controlling apartment prices and achieving a record high employment rate despite the deepening suspicion about data massaging.

Data manipulation is dangerous because it can distort reality. According to the REB data, housing prices in Seoul rose 19.5 percent over the five years of Moon’s presidency. But in KB Kookmin Bank’s survey, the jump was 62.2 percent. The instability of the property market resulted from supply shortages and public anxiety. But the government policy only focused on suppressing demand through tax hikes, loan restrictions and regulation on redevelopment permits. Multiple regulations only helped escalate pseudo demand and real estate prices.

The income-led growth policy prompted serious doubts after the minimum wage spiked in early 2018. The gain in employment immediately stagnated and even fell to 3,000 by August. The wealth disparity hit its worst in the first quarter since data was tracked — with the income gap between the bottom quintile and the top quintile widening to 5.95 times. Yet during a public finance strategy meeting on May 31, 2018, the president celebrated his signature income-led growth policy, saying the positive effect from the minimum wage hike was 90 percent. The following year, the government raised the minimum wage by 10.9 percent again and rocked the industrial and job market.

The BAI findings pose a serious question about the former administration. Was achieving its goal of stabilizing housing prices and pitching income-led growth more important than peoples’ livelihood? Can it still pride itself as a democratic government? Was the data manipulation ordered or condoned by the president himself? Or was the misdeed committed by his aides and ministers done without his knowledge?

Data distortion has ruined many countries in the past. The national default and bailout of Greece from the fiscal deficit originated from the government’s underreporting or misrepresentation of statistics. The wrongdoing should not be taken lightly. Falsified data can lead to bad policies and damage the economy. The ballooned household debt under the housing crisis has come to choke the economy. The income-led growth policy has distorted the job market.

After the BAI announcement, the former president claimed that the employment rate — an youth employment rate, in particular — was seeing historic highs under his reign. He even posted on Facebook a report by a liberalist research center supporting his claim. But the strong employment numbers under his five-year term owed much to the surge in hourly hires and temporary public jobs for senior citizens from tax funds, to cover up the side effects from his income-led growth policy. They are hardly decent jobs anyone could be proud of.