Speaking at a meeting of local small business owners Tuesday, President Moon Jae-in insisted the South Korean economy “is moving toward success,” defending his income-led growth policy, which critics say has led to sagging corporate activity and worsening unemployment.
Government data released a day after his remarks showed the country’s unemployment woes continuing to deepen.
According to figures from Statistics Korea, the unemployment rate rose 0.3 percentage point from a year earlier to 4.4 percent in April, marking the highest level for the month since 2000. The number of jobless people stood at 1.24 million last month, up 84,000 from the year before and the highest figure for April since the data started being compiled in 1999.
What is particularly concerning is that the number of jobless people in their 30s and 40s decreased for 19 consecutive months through April, with the manufacturing sector recording net job losses for 13 straight months.
Separate data recently published by the Ministry of Employment and Labor showed the amount of unemployment benefits paid out jumped 35.4 percent on-year to a record high of 738 billion won ($620 million) last month.
Already, in contrast to Moon’s optimistic view of the economy, there has been a simultaneous decline in facility investment, consumption and exports in recent months. The latest employment figures should serve as the final decisive factor to push Moon to change his perception and redress his misguided policy.
Moon and his aides have said it will take some time for the income-led growth policy to bring about its intended outcomes, attributing the recent economic slowdown mostly to unfavorable external conditions.
Their argument certainly sounds hollow to the increasing number of people out of work. Frustrated with the tightening labor market at home, many young Koreans have been looking for job opportunities abroad -- for example, in the US and Japan, where the unemployment rate has dropped to the lowest level in half a century and in nearly three decades, respectively.
In April, the employment rate rose only among those aged 60 or above -- the main beneficiaries of government programs to create mostly low-paid temporary jobs through fiscal expenditure.
This employment situation should vex the Moon administration, which has put top priority on job creation since it assumed office in May 2017.
What is clear now is that its income-led growth policy, driven by a set of labor-friendly measures that have increased financial and regulatory burdens on companies, has prevented the addition of jobs to the economy.
In Tuesday’s speech, Moon said he would pay more heed to concerns expressed by businesspeople about the negative effects of steep minimum wage hikes and the shorter workweek.
Given his perception that the economy is moving in the right direction, it is still hard to expect him to make a fundamental policy shift.
What should further prod the Moon administration to rethink its policy is an exodus of local firms to avoid rising labor costs and complex regulations here.
Overseas direct investment by Korean companies increased 9.1 percent from a year earlier to a record high of $47.8 billion last year. The figure for small and medium-sized firms, in particular, jumped 31.5 percent to exceed $10 billion for the first time in 2018.
By contrast, facility investment at home has continued to decline. Korea saw domestic facility investment shrink 10.8 percent on-year in the January-March period of the year, recording the steepest quarterly decrease in more than two decades.
The hollowing out of the manufacturing sector has resulted in a massive loss of jobs at home.
Improving business conditions is all the more necessary to attract more foreign investors. Foreign direct investment here has continued to fall since the third quarter of last year, with new FDI pledged to the country decreasing 35.7 percent on-year to $3.17 billion in the first three months of 2019.
Aside from making efforts to reduce labor costs and ease regulations, the country should provide more incentives, including lower corporate taxes, to draw more foreign investors.
In his speech to small business owners, Moon pledged to forge an environment where corporations can trust the government and challenge themselves repeatedly.
He should go beyond the rhetoric and put concrete measures in place to build a more corporate-friendly environment.
Most corporate officials here may have little affinity for US President Donald Trump, whose protectionist moves have adversely affected their business. But they were impressed by a photo he posted Monday on Twitter, which showed him greeting Lotte Group Chairman Shin Dong-bin at the Oval Office to show his appreciation for the Korean conglomerate’s investment in a chemical plant completed in Louisiana last week.
A similar show of appreciation should not be too much to expect from Moon.