South Korea: Moon’s Goal of Becoming Korea’s ‘Jobs President’ in Jeopardy

  • South Korean President Moon Jae-in’s goal of becoming a “jobs president” is looking increasingly like a stretch, as joblessness rises despite his government’s efforts.
  • Unemployment in Mar 18 jumped to the highest level since 2010, and many are blaming Moon’s aggressive increase in the minimum wage, putting his economic agenda at risk less than a year after he took office.
  • Moon became South Korea’s first liberal president in a decade by promising voters to pursue social justice and “income-led growth” at a time of rising anger over inequality and stagnant incomes. He pledged to create hundreds of thousands of public-sector jobs, to subsidize hiring at small businesses and to provide direct assistance to job seekers.
  • Now the government is pushing for its second extra budget to create jobs, at a cost of JPY3.9tr. But resistance is growing among conservative opposition parties in parliament, where Moon’s party lacks a majority. Conservatives say the new proposed spending package is a “populist” giveaway to voters ahead of nationwide regional elections in Jun 18.
  • It doesn’t help Moon that many economists are blaming the 16% increase in the minimum wage, which took effect in Jan 18, for the rise in unemployment.
  • “If the job situation remains weak, which I think it will, it will increase criticism over the effectiveness of Moon’s economic policies, especially the minimum wage increase,” said Yun Chang-hyun, a professor at the University of Seoul and a former head of the Korea Institute of Finance.
  • Yun said the minimum wage hike was the main reason for recent weakness in jobs data, noting that the increase was about 10 times the annual inflation rate.
  • The Bank of Korea recently lowered its projection for 2018 job growth to 260,000, which is almost 20% less than the increase seen in 2017. The government’s forecast remains at 320,000.
  • Moon’s approval rating remains relatively high at 70%, according to a Gallup survey released on 20 Apr 18, but a poll in Jan 18 found 39% of people said the minimum wage hike would have a negative impact on the economy, while 38% said they expected it to be positive.
  • For now, the supplementary budget proposal, submitted to parliament on 6 Apr 18, is languishing. So far no committee has reviewed the bill.

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