“The current economic crisis is being compared to the Great Depression 100 years ago. Amid huge economic damage, our nation is indeed in a state of war,” President Moon Jae-in said in his special address marking the third anniversary of his inauguration on Sunday. He mentioned the term “economy” as many as 19 times, thus clarifying that overcoming the economic crisis stemming from the COVID-19 pandemic will be the core mandate of his government’s state administration during the remaining two years of his presidency.
To tackle the current economic crisis, President Moon said he would implement a “Korean version of the New Deal” and establish a cornerstone to introduce an employment insurance program for the nation’s entire economic population. A universal employment insurance program was an issue that his senior secretary first mentioned on May 1, but the presidential office backed off a bit later, saying, “It is a mid- to long-term task, rather than an immediate plan.” The president has now officially declared his bid to push for the program.
Securing an employment safety net is necessary but the problem is who will pay the cost. Currently, 13.53 million people, or half of the 27.36 million workers, are subscribing to the national employment insurance program, while about 10 million people including those under special employment contracts and freelancers remain unprotected by the insurance program. Since it is not clear who these people’s employers are, it is not easy to integrate them into the current employment insurance system, for which workers and employers each pay half of the premiums. If the government recklessly enables those workers to subscribe the insurance program to cause a deficit, a significant portion of the deficit should be filled with the government’s budget, and taxpayers will be forced to pay even more taxes. Of the 11.41 trillion won that was collected as employment insurance premiums last year, deficit amounted to 2 trillion won.
There is also significant gap between the ideal and the reality in the president’s proposed policy to attract Korean companies back to the nation, aiming to become the world’s high-tech industry factory. Advanced countries have been racing to cut corporate taxes in a fierce battle to attract their domestic companies that left those countries, but Korea has rather increased corporate tax rate and the minimum wage has been hiked as much as 32.8 percent over the past three years. When compared with rival countries including the U.S. and Japan, Korea is offering relatively weak incentives to companies returning to the country. As efforts to bring back Korean businesses, the government should present attractive incentives and measures.
Pundits say that the “Korean version of the New Deal,” in which the country plans to create jobs for younger people by constructing data infrastructure and nurturing “untact” industries, can be differentiated from the previous economic stimulus measures that were usually civil engineering projects. As there are many sectors whose stakeholders are strongly opposing the plan, the government should have its strong driving force and persuasive leadership in the course of actual implementation.
Overcoming the economic crisis wrought by the COVID-19 pandemic is an agenda that will determine the nation’s fate. Against this backdrop, the entire nation should gather wisdom to form unity while abandoning interests for ideological or political factions. While all parties and factions stop dividing the public, the government also should shift the direction of its economic policies. Now is the time the government has to transform its economic policies, which critics say are ideologically biased or obsessed by making excessive goals. To that end, the government should invigorate businesses and perform deregulation to create jobs. Without changing the current policies that brought about side-effects such as declining jobs and economic recession, it is almost impossible to bring back on track the economy hit hard by the pandemic within two years. Considering the gravity of the current economic crisis, the government should make a dramatic decision to severe ties with the past.