Youth employment fund event

Korean President Park Geun-hye proposed to create a "youth employment fund" at the Cabinet meeting Tuesday. Her proposal intends to create a fund as a part of efforts to share a burden to create jobs for young people, in line with the spirit that achieved a great consensus in the Korea Tripartite Commission between labor, management and the government. If Park donates some portion of her monthly wage, the ministers have to follow the suit. If the fund is filled by social leadership’s participation, the fund will be used to provide customized training or wage support for the youth employment and business start-ups by young people.

The proposal itself is well-intentioned, but it remains questionable how much it can help create jobs for young people. The reason why businesses do not hire the youth or the youth cannot start businesses is not money. Thanks to the low interest rate policy, the Korean market is flush with money. With a right idea and a market, a business starter can raise money with almost zero percent of interest rate. Korean companies have a record-high internal reserves which amount to 710 trillion won (approx. USD 601.37 billion) and cash holdings of 170 trillion won (USD 143.99 billion). Companies refrain from hiring due to uncertainties in the future. Even though the government provides financial support, they cannot hire unnecessary employees.

Even worse, the youth employment fund reminds of the government-led mobilization in the 1970s. A company executive said, “If the government creates the fund, businesses have no choice but to donate money. It is another quasi-tax.” In the modern society, very few fund-raising campaigns were led by the government. Private sector initiated and led the national debt redemption movement during the Japanese colonial rule and the gold collection movement right after the foreign exchange crisis in 1997. Under the Lee Myung-bak administration, the Ministry of Unification started a campaign of "Unification Jar" to prepare funds for unification between the two Koreas. Then-president Lee Myung-bak took initiative and donated money, but the campaign petered out.

Some businesses complain by saying that the presidential office must stop such events. Jobs will be naturally created when businesses are running well. Businesses also say that the government does not consider the growth engine and pursues only events, such as the creation economy innovation centers and the youth employment fund. The government has spent 44.8 billion won (approx. USD 37.94 million) in 19 projects for overseas employment of Korean youth last year alone. But only 1,100 Korean young people who were employed overseas. Some critics say doling out 40 million per each would be more helpful for Korean youth. Concerns are growing as to whether the government, which has wasted money from the financial projects based on tax, can properly operate a fund.

ysshin@donga.com