[Editorial] Obstacles to Job Growth in Service Sector

The government will likely have to bet its job creation efforts on the galvanization of the service sector. Employment statistics by industry also suggest that manufacturing saw jobless growth while science and technology, healthcare and social welfare, and education posted monthly job growth between 1.4 and 20.7 percent. Korea ranks first in the portion of manufacturing relative to gross domestic product, but is second to last in the service sector among the 30 member countries of the Organization for Economy Cooperation and Development.

To develop the Korean service sector, drastic deregulation is needed for industries such as medicine, legal services, education, tourism and conventions. At a meeting of the parliamentary special committee on budget and accounts yesterday, Prime Minister Chung Un-chan said, “We set next year’s budget by putting the utmost priority on the people’s livelihood and job creation,” urging fast approval of the budget plan. On Sunday, 18 government bodies related to the service sector, including the Strategy and Finance Ministry and the Knowledge Economy Ministry, announced a strategy for the implementation of international economic policy, including the establishment of foreign-run hospitals in free economic zones. But worryingly, the Health, Welfare and Family Affairs Ministry, the Education and Science and Technology Ministry, and the Justice Ministry, all three of which oversee the service industry, are fighting over administrative turf and the status and protection of workers in the field. Experts say the Strategy and Finance Ministry is even having trouble fine-tuning policies with related ministries ahead of the announcement of next year’s economic policy direction set for Thursday.

The government in May announced a plan to advance the service industry, including allowing the setup of foreign-run hospitals in free economic zones. But talks were halted after related ministries expressed opposition. In August, a forum to be hosted by the Fair Trade Commission to deregulate service industries, including beauty care and auto rentals, was blocked by the sectors in question. Opponents say the policy was devised only to benefit the rich, warning small businesses could go belly up. These claims are biased, however. Reducing entry barriers will result in at least one more new job and offer consumers cheaper and higher quality services. An OECD report on economic reform for growth also suggests that industrial competitiveness increases only after entry barriers are lowered and competition is promoted, especially at a time when the economic situation is dire.

In an emergency economic review meeting two months ago, President Lee Myung-bak urged the ruling party to help the administration get bills passed as soon as possible on deregulating the service industry to create jobs. He needs to prompt ministers to renew their commitment first, however. But can the government persuade them as well as help people in relevant industries and the general public to understand when it can hardly coordinate inter-ministry conflict? Raising economic growth by injecting public funds has its limits. Only when more jobs are created can people truly feel that the economy is improving.