Moon admin. should change fundamental direction of economic policies

The current South Korean administration led by President Moon Jae-in is about to reach its half-way point on Saturday. The administration, which emerged in May 2017 following the impeachment of former President Park Geun-hye, has been pursuing a number of reforms under the banner of a “fair and just Republic of Korea,” however, is assessed to have been not so successful so far. The country’s people have been especially harsh on the economy side. According to the survey conducted by the Dong-A Ilbo of 1,000 male and female adults, six out of every 10 respondents answered the job creation efforts implemented by the government as its primary national agenda were done inadequately. Economic growth was chosen as the area with the poorest performance by the current government.

The Moon administration put forward three major objectives – income-led growth, a fair economy, and innovative growth – with a focus on the people-centered economy. The goal was to let everyone equally enjoy the benefits of growth by promoting mutual growth of large companies and small- and medium-sized enterprises and reinforcing the social safety net. In fact, the new government has increased social safety net benefits by raising unemployment benefits, expanding employment insurance, and introducing the “Moo Jae-in care.” However, the rapid increase of minimum wages and the introduction of the 52-hour workweek system have been criticized for weakening the employment capacity of small businesses, worsening the polarization of wealth. In addition, increased regulations, anti-business sentiment, and rigid labor movement have severely hurt the morale of business people. As the outcomes on the ground have been different from the intention of policies, the fundamental direction of such policies must be changed by analyzing causes.

South Korea’s employment rates, which were almost tragic last year, are showing the signs of recovery this year, but most of the newly created jobs are part-time positions for elderly citizens, which are generated by the government’s direct input of tax revenues and low-wage positions dependent on government subsidies. As the number of quality positions is decreasing due to the weakened international competitiveness and employment capacity of the manufacturing sector, the lack of jobs meeting the expectations of young South Koreans who have the highest level of academic background and qualifications in the history of the country is creating a serious issue.

Meanwhile, despite the implementation of over 10 real estate policies by the incumbent administration, regional polarization has worsened as real estate prices in Seoul have skyrocketed while those in rural areas have gone down. The government should reflect on the reasons why private sector capital is concentrated on real estate, rather than flowing into more productive areas, such as start-ups or investment, and come up with adequate measures. The solutions to address severe challenges experienced by 5.66 million self-employed people resulting from the growth of e-commerce and increasing competition are hard to find despite creating secretary positions for the self-employed at the presidential office Cheong Wa Dae.

The remaining term of the Moon Jae-in administration will not be smooth either. The global economy is slowing down from the trade conflicts between the U.S. and China and the impact of protectionism. President Moon has visited high-tech industrial plants and businesses, including Samsung Electronics, and promised large-scale investment, but the economy hasn’t shown any sign of a rebound. The country’s economic growth rates recorded 3.1 percent in 2017 and 2.7 percent in 2018, followed by this year’s figure that may fall below two percent. The wealth polarization in the country is increasingly worsening. Bold deregulation should be implemented to boost the private sector while investment in future industries should be made to drive up growth potential. This is the only way that the Moon administration can recover from its poor economic performance in the first half of its term.