Wrapping up its 48 days of operation, President-elect Park Geun-hye’s transition team said Thursday that the incoming administration would focus on job creation. Few would say the transition team was misguided when it put the provision of jobs on top of the list of five goals in Park’s administration of state affairs.
But the transition team was ill-advised when it implied that the Park administration would put employment before growth as if the two had no close relationship. Instead, they go together, making it impossible for an economy growing at a snail’s pace to create many jobs.
The Hyundai Research Institute says a one-percentage-point increase in the nation’s growth potential means 320,000 to 360,000 new jobs during the next five years. But the institute said the growth potential, which stood at 6.5 percent during the 1990-2000 period, dropped to 4.2 percent during the 2001-10 period. The institute’s estimate put the current growth potential at 3.7 percent now.
True, it would be unrealistic for the Park administration to promise to raise actual growth far beyond growth potential, as the outgoing President Lee Myung-bak did when he committed himself to boosting growth to an annual average rate of 7 percent five years ago. Still, the Park administration will have to focus on raising growth potential if it wishes to boost growth and, by doing so, create a large number of jobs during her five-year governance.
Park’s designate for the post of deputy prime minister for economic affairs, Hyun Oh-seok, was right when he said the major economic issue for the short term would be how to speed up recovery. The Park administration would have to focus on actual growth and welfare on one hand and growth potential on the other, he told reporters upon being designated for the top economic post.
This is not to dispute the transition team’s claim that small- and medium-sized business enterprises, given the right incentives, tend to become more resilient in creating jobs than corporate conglomerates and that the Ministry of Future Creation and Science, an agency to be newly established, will lead job creation, focusing on ventures. Still, this policy will be derailed if growth stalls.
This is the very reason why attention must be paid to what Hyun said when he was president of the Korea Development Institute. At the time, he proposed to increase spending and cut interest rates for an early recovery.