The defectors dilemma
From 2014 to 2015, the average monthly household income of North Korean defectors was 1.49 million won ($1,320), just 35 percent of the average South Korean’s salary. So far, 30,000 North Koreans have defected to the South, and 2,000 of them seem to have left. While 55 percent, or about 15,000, of the defectors living in the South are employed, 4,000 work for companies where the government subsidizes half of their salary.
Among the remaining 11,000, many work for pubic corporations or social organization dealing with North Korea-related work. Despite the support, the unemployment rate of defectors was 8.3 percent when overall unemployment in the South was 3.4 percent between 2010 and 2015. Without the support and assistance of the government and society, the unemployment rate of the defectors could exceed a whopping 50 percent.
The current assistance-oriented policy only works when the number of defectors remains in the several tens of thousands. If 100,000 North Koreans come to the South every year, it takes an additional 2 trillion won to provide each one-person household with 7 million won in basic settlement subsidies and 13 million won in housing subsidies. Considering the medical, educational, pension and employment-related costs and basic living subsidies and administration expenses, the current system can hardly continue. Moreover, when the “greater reunification” comes suddenly, South Korea cannot finance current policies.
When the majority of defectors can compete with South Koreans and find a job, the “test-bed for unification” will be successful. To achieve that goal, the quality of North Korean human capital should be enhanced to help them assimilate to the norms of the market economy.
This is not something that can be accomplished by revamping the settlement support for defectors. It requires consistent and quality research. Questions like what kind of education and vocational training should be given to what demographic and what we should do to help them accept South Korean values and norms also need to be answered.
German reunification took an astronomical amount — 3,000 trillion won — mainly because of the gap between the human capital of East and West Germans. The huge reunification cost was not relieved by the exchange rate between East and West German currency, which was set at 1 to 1. No matter the exchange rate, companies would not pay more than the productivity of their workers if they can decide the wage.
The ratio of South and North Korean per capita income is 100 to 3, meaning that the human capital gap between the two Koreas is far greater than that of East and West Germanys. North Korean students suffer from malnutrition and forced labor. Moreover, a large portion of the North Korean curriculum deals with “Juche ideology,” which actually hinders the accumulation of human capital. If the human capital gap is not reduced, we will fail miserably when greater reunification comes.
The difference in values is also a major issue. According to a paper published by a group of Seoul National University economics professors in an American comparative economics journal, North Korean defectors have a strong tendency toward pursuing uniform equality. Another research paper shows that North Korean defectors who received education in the South were more reluctant to engage in competition than those with no exposure to education in the South.
When defectors study in South Korean schools, they acknowledge the difference in level with the South Korean students and lose confidence. If left unaddressed, their education in the South might encourage them to give up competition and choose welfare benefits rather than compete in school and get a job.
South Korea has a weaker economic presence than West Germany, but we can prepare for reunification. Nevertheless, we have been wasting the opportunity. It’s been two decades since defections began to increase in the late 1990s, but the government has been spending hundreds of billions of won without really studying or developing research-based policies.
The successful settlement of defectors is the key to unification preparation. If we cannot make this early version of unification successfully, there will be no unification jackpot or pressure on Pyongyang. It will be all talk and no action.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Oct. 20, Page 35
*The author is an economics professor at Seoul National University.