World Economy

S. Korea Policymakers Split Over Employment Doldrums

The job market condition seems to have worsened due to multiple factors including structural and economic problems as well as policies
Government data shows the number of jobs created in July fell to the lowest levels in over eight years.Government data shows the number of jobs created in July fell to the lowest levels in over eight years.

South Korea’s ranking officials revealed a disparity in their views on economic policies in the wake of dismal job conditions, which critics attributed to the effect of President Moon Jae-in’s progressive policy.

Senior officials from the presidential office, government agencies and the ruling party held an emergency meeting to discuss ways to boost employment after the nation logged the lowest level of job addition in more than eight years in July, Yonhap reported.

They all conceded the policymakers should take responsibility for the jobs crisis and agreed on the need for continued expansionary fiscal policies to spur growth and create jobs. But Moon’s top aides appeared to differ in their views on the cause and solution of the employment doldrums.

Jang Ha-sung, presidential chief of staff for policy, one of the key architects of the so-called income-driven growth drive, expressed confidence in the long-term effect of the policy and called for patience until it delivers tangible results.

In contrast, Finance Minister Kim Dong-yeon, regarded as an advocate of market-driven growth, said the government will review the effect of its economic policies and will revise its elements if needed.

“The job market condition seems to have worsened due to multiple factors including structural and economic problems as well as policies. Since diverse problems are comprehensively emerging, it won’t be easy to find a solution in the short-term,” he said.

“We will examine the effect of economic policies implemented so far and consider improving or modifying them if necessary, following consultations with related ministries,” he said.

He said that the administration will implement expansionary fiscal policies next year while speeding up execution of the supplementary budget. “The government will accelerate innovative growth policies and deregulation to encourage businesses,” Kim said.

 Lowest Since January 2010

The meeting came after government data showed Friday that the number of jobs created in July fell to the lowest levels in over eight years, a blow to Moon, who pledged that job creation would be a priority policy goal.

The unemployment rate stood at 3.7% last month, up 0.3 percentage point from a year earlier, according to the report compiled by Statistics Korea. The number of employed people reached 27.08 million in July, up just 5,000 from the same period in 2017, the smallest gain since January 2010, according to the data.

The poor performance came as Asia’s fourth-largest economy struggles with the fallout of corporate restructuring and stagnant domestic demand.

Critics also said the president’s mantra of income-driven growth and policies of increased wages have backfired as businesses avoid hiring amid signs of economic slowdown and out of concern over increased labor costs.

Jang noted that employment issue is not something that can be fixed in a short timeframe.

Rep. Kim Tae-nyeon, policy chief of the ruling Democratic Party, also called for an expansion in fiscal spending, noting that the government expects to see an increase in tax revenue by 60 trillion won ($53 billion) over the next five years.

 Firms See Hope

After a dramatic fall in investment by South Korean companies, encouraging comments in June and the impact of China-US dispute raised possibility of a turnaround.

Ties between Beijing and Seoul have been strained in recent years by the deployment in South Korea of a US missile defense system known as THAAD, with the dispute leading to Chinese boycotts of South Korean companies.

But Kim Yun-hee, a senior trade commissioner from the Korea Trade-Investment Promotion Agency office in Beijing, said renewed economic relations may be possible between South Korea and China if firms from the South had a chance to air their concerns about doing business in China.

Chinese Premier Li Keqiang told the trade group in June in Beijing that China and South Korea should join hands to protect free trade and multilateralism. Representatives from SK Group, Samsung and Hyundai attended the meeting.

Li’s remarks in June were made as the trade war between the US and China drew closer, with each side threatening tariffs and China actively seeking alliances to offset the impact.

A South Korean government source said the trade war may be a double-edged sword, because there have been concerns that it may hurt Sino-US cooperation on denuclearization in North Korea.

Kim said the dialogue might help restore economic ties between Seoul and Beijing, by improving communication between South Korean firms and Chinese officials.


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