À̹ÌÁö È®´ë From left to right, Hong Jang-pyo, chief of special committee for income-led growth and former senior presidential secretary on economy; Kim Dong-yeon, deputy prime minister and finance minister; Hong Young-pyo, floor leader of the ruling Democratic Party. [Photo by Kim Ho-young]
Defiant of mounting criticism and sinking approval rating, the Moon Jae-in administration doubled down on the increasingly unpopular income-led growth policy by launching a special presidential committee devoted to press ahead with the platform.
Hong Jang-pyo, architect of the non-mainstream economic policy who recently lost his job as the president¡¯s senior secretary on economy, was beckoned back to spearhead the new committee.
Hong claimed income-led growth policy is ¡°not one of many options, but the sole solution to combat Korea¡¯s structural problems¡± as the Korean economy no longer can rely on the trickle-down effect from large companies and exporters as in the past industrialization period.
The special committee consisting of 28 members including government officials, scholars, and civic activists will be devoted to exploring ways to increase income for the bottom rung and ease wealth inequalities.
¡°The widening gap in income between companies and households, between large corporations and small/medium companies, between permanent employees and temporary workers, has hampered sustainable growth.¡±
He stressed on the government role to set market order and strengthen social security and welfare to improve income distribution.
The liberal government¡¯s economic agenda under the slogan of income-led growth has drawn criticism and backlash from its biggest supporting base - the working and poor class - as the policy designed to increase income and jobs for the most vulnerable class only ended up hurting their jobs and income.
In July, the country added a mere 5,000 jobs against the year-ago period, halved from the 106,000 new hires in June and significantly down against last year`s monthly average of 300,000. Facility investment in June also sank to an 18-year low as companies refrained from spending due to the higher labor costs.
The poor got poorer and the rich richer under the policy. Earnings of households in the first income quintile group, the bottom 20 percent of the population, sank 7.6 percent in the second quarter against a year-ago period, after an 8.0 percent deterioration in the first quarter. The income of the second and third quintile groups fell by 2.1 percent and 0.1 percent, respectively, while that of the fourth quintile gained 4.9 percent and that of the fifth 10.3 percent. The top tier now earns five times more on average than the bottom 20 percent.
The keystone of the income-led growth policy was the president¡¯s pledge to make hourly minimum wage 10,000 won ($8.91) within three years. The minimum wage was pushed up by 16.4 percent from January and is set to go up by another 10.9 percent from the beginning of next year.
The sharp spike in minimum wage landed hard on shopkeepers and self-employed who make up a quarter of the country¡¯s working population. They reduced hiring to wipe out job count in the wholesale, retail, restaurant, and other services sector that pay by the minimum wage.
President Moon Jae-in a message to a recent ruling party convention claimed that the government was in the ¡°right direction in economic policy.¡± Jang Ha-sung, his policy chief, also said the latest data called for a stronger push in income-led policy and claimed positive results would show from next year.
Their pitch, however, has not convinced the public or some in the administration.
Kim Dong-yeon, deputy prime minister and finance minister, attending the launching event for the committee on income-oriented policy, expressed skepticism over its policy effect in near future and called for more attention to reinvigorate corporate activity and investment.
¡°The policy to bolster income must be pursued in respect to companies and market. Policy priority and drive pace should be moderated according to market conditions and response,¡± Kim said.
Kim Kwang-doo, vice chairman of the National Economic Advisory Council, reportedly advised the president to change course in economic policy.
Moon¡¯s approval rating that has been skidding since the release of July job data report fell below 50 percent this week, compared with near 80 percent in June.
By Yeon Gyu-wook and Cho Jeehyun
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]