South Korea’s Deputy Prime Minister Kim Dong-yeon said Wednesday the country needs to tackle unemployment, foster innovative growth and address the low birthrate and aging population, a week ahead of releasing the economic policy direction for next year.
While Kim assured that Korea would achieve economic growth of 3 percent this year and maintain a robust uptrend in the wake of the improving Korea-China relationship, he said the country would face persistent economic threats from within the country.
“Korea might experience jobless growth, while low fertility and aging demographics in the nation are likely to pose long-term pressure on the economy,” Kim, who is also the finance minister, said at a ministerial-level meeting Wednesday at the Government Complex Seoul.
“The economic policy direction next year will focus on employment, innovative growth and aging,” Kim said.
Kim also urged for the government to make all-out efforts to enhance manpower, education and digitized systems in order to implement financial support for small enterprises, which are expected to suffer amid soaring labor costs due to a minimum wage hike.
Starting in January, Korea will have its minimum wage set at 7,530 won ($7) per hour, up 1,060 won, or 16.4 percent from this year, the sharpest rise in about two decades.
To address employers’ concerns, Korea has allocated 2.97 trillion won in subsidies for monthly financial support of up to 130,000 won per employee to small firms with less than 30 employees. The policy is projected to affect over 3 million employees. Applications will be accepted both online and at some 4,000 offline branches.
“(The subsidies) will play a critical role in wage-led growth and the virtuous cycle of growth of the domestic economy,” Kim said. “But the rising labor cost might undermine employment, raising the need for all-out efforts to implement the policy successfully.”
During the meeting, Kim also vowed to lessen the burden of a health insurance rate hike, mainly by reducing the nonpayment of health insurance premiums to help the underprivileged.
Labor Minister Kim Young-joo and Welfare Minister Park Neung-hoo attended the meeting.
The Finance Ministry is expected to target economic growth rate of 3 percent for 2018, or higher, fueled by improvements in consumer spending following wage hikes and other measures despite an anticipated slowdown in corporate investments.
Bank of Korea Gov. Lee Ju-yeol also projected the economy would grow at around 3 percent in 2018 from this year, a level similar to other predictions by foreign and domestic institutions including the International Monetary Fund, Organization for Economic Cooperation and Development and Korea Institute for Industrial Economics and Trade.
While improving relations with China are expected to pick up trade, the Seoul government’s stern real estate measures are expected to pull down the construction market, observers noted.
By Son Ji-hyoung