Sufficient deregulation and consensus-seeking should follow
In the wake of the dismal fall in employment for April, the government has swiftly put forward a plan to create 1.56 million jobs in the public sector.
In April, the number of employed here stood at 26.6 million, with Korea shedding 476,000 jobs during the month, year-on-year, a figure close to the 658,000 lost in February 1999, according to government statistics.
The swift “fire-extinguishing” announcement by Deputy Prime Minister and Finance Minister Hong Nam-ki is reassuring for now. Yet at the same time, it is disconcerting to think about whether the Korean economy will have the ability to prepare for the post-COVID-19 world.
The deputy prime minister announced that the 1.56 million jobs include at least 550,000 new jobs for young people at public firms, and about 1 million that will soon resume as social distancing rules have eased. Some of these jobs will be paid for through the third supplementary budget.
As President Moon Jae-in has rightly identified that job retention and creation are crucial in this crisis, public sector employment can absorb a certain portion of the unemployed desperate for income. The administration has so far pledged 245 trillion won ($199 billion) to relieve the COVID-19 wrought economic woes. With more grim economic indices expected, there is an uneasy feeling about just how much more fiscal spending is going to occur. Thus, the policymakers need to definitively and persuasively reassure the people and parliament with detailed action plans on how to tide over the COVID-19 crisis.
There is a general assessment, however, that public sector jobs tend to be lagging in quality in terms of productivity and sustainability. The deputy prime minister himself said Thursday that the “private sector remains responsible for job retention and creation.” There are moves within the ruling bloc to push various deregulation measures to vitalize the private sector into hiring and making investments. But it could also look to cutting taxes including corporate rates.
Businesses have responded positively to President Moon's vow to turn Korea into a “digital powerhouse” of innovative ventures and startups and a “world factory of high-tech industries” in order to attract such firms and overseas investment. These goals will also compel deregulation. But they may also require adjustments to the income-led growth and 52-hour workweek policies, and it is questionable as to whether administration is willing to do this.
The direr the economic situation grows, the more policymakers should resist the temptation to do what currently feels easy. Listen broadly to what the private sector, workers and taxpayers want so that Korea can move forward to innovative productivity once the virus is conquered.