[Editorial] Fall in Per Capita Income is Intolerable

Real gross national income posted negative growth last year for the first time since the 1997 financial crisis. Per capita income fell from 21,695 dollars in 2007 to 19,231 dollars last year, ending the era of 20,000 dollars in average income within a year. The average national income recorded its first decrease since 2001. A drop in average income leads to a fall in disposable income (purchasing power) and consumption, which undermines quality of life. Less consumption leads to sluggish economic recovery.

The government predicts economic growth of negative two percent this year. The annual average of the won against the dollar is expected to hover around 1,200, higher than last year’s 1,102. Despite the won’s recent surge, per capita income could fall under 17,000 dollars. Though the Korean economy has been hit hard by the ongoing global financial crisis, it cannot just blame external factors. If the government boosted domestic consumption, strengthened fundamentals, and increased its crisis management capacity to cope with possible external shocks, per capita income would not have fallen more than 4,000 dollars within two years.

Though the financial crisis has abated to a point and several industrial indexes are showing a turnaround, the real economy has not bottomed out yet. It is hard to hope for a “V”-shaped recovery, and Korea will be lucky if it sees a “U”-shaped recovery instead of the longer “L”-shaped recovery.

The government must plan and manage follow-up measures for two major projects - the Green New Deal and Human New Deal - in detail by deciding on the period (long and short term) and who will lead them. In addition, the temporary suspension of regulations, in which the government will suspend or lift regulations in the second half of this year to promote investment, create jobs and relieve the burden of low-income households, must be helpful to stimulate businesses and households. The government must get rid of all hindrances limiting business activities from regulations on start-ups to fees and obligations to educate employees. Deregulation is a way to stimulate the economy without using taxpayers’ money. Improvements are needed to make Korea a country attractive for investment.

Restructuring in a recession decides national competitiveness after the crisis. Korea needs more employment flexibility. To revive the slumping economy, all economic players must share the burden.