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[Editorial] Change job policies

Government must shelve income-led growth model, boost corporate investment

Economy-related ministers, the Cheong Wa Dae chief policymaker and ruling party floor leader held an emergency meeting Sunday to discuss ways to tackle the worsening employment situation.

The number of those employed increased by a mere 5,000 in July from the same month last year, the worst figure since July 2010. The on-year employment increase shrank to one-63rd of last year’s monthly average increase of 316,000.

It was a belated but much-needed wake-up call regarding the seriousness of the jobs problem. At issue is the direction of government policy.

The government has so far resorted to fiscal support each time it had employment woes, but the situation has gone from bad to worse.

This time is no exception.

In the meeting, the officials reportedly agreed to expand next year’s job budget by more than the increase rate -- 12.6 percent -- of this year’s budget. This year’s job budget amounted to 19.2 trillion won ($17.1 billion) so the one for next year is expected to exceed 20 trillion won.

“If the income-led growth model begins to produce effects, the employment situation will improve,” Jang Ha-sung, presidential chief of staff for policy, said in the meeting, “We will draw up next year’s job budget in the direction of increasing the income of the young, the aged and the poor.”

It is understandable for the government to use its budget to induce employment, but fiscal support is not the right way to create jobs. A fiscal injection is nothing but a quick fix.

Fiscal measures for jobs are less efficient and cannot last long.

The existing jobs budget has not been fully executed yet. The government has spent only 31.7 percent of the supplementary budget it drew up last year to subsidize youth employment.

Above all, it is impossible to sustain employment with taxes. There is no guarantee that large companies, including Samsung Electronics, will keep posting large earnings and that tax revenues will keep increasing.

Employment measures relying on supplementary funds will only waste taxpayers’ money without producing intended effects.

The fact that employment shrank even as the government has poured taxpayers’ money into job programs exposes the limits of its policies. Many policies are malfunctioning: pushing for the direct hiring of outsourced workers, raising corporate taxes, hiking the minimum wage and shortening the workweek. The government has often intervened in the market, ignoring its autonomous mechanism.

The employment market has flashed warning signals for more than half a year, but the government has tried only fiscal support while turning a blind eye to problems with its policies, leading to the deterioration of the jobs situation.

The most culpable is the excessive rise in the minimum wage.

The government must pay attention to the fact that employment has fallen off a cliff in wholesale, retailing, lodging, restaurant and leasing businesses, among others. These are among the industries most affected by the minimum wage.

Employment in these fields, which had been expanding until the end of last year, began to drop from this year. This cannot but be explained by a 16.4 percent hike in the minimum wage. Small business owners have protested a further raise of the minimum wage for next year.

The government must admit that a sharp hike in the minimum wage in accordance with the income-led growth model has led to the elimination of jobs.

A fundamental shift of employment policies is urgent.

Jobs should be created by companies. Naturally they will hire more employees on their own if investment is deregulated and tax is cut, as has occurred in the US and Japan.

The jobs situation has worsened because the government has taken stopgap measures to deal with the side effects of its misguided policies. To accelerate employment increase from now on, it must shelve the income-driven growth model that has produced only the opposite effect.

At the same time, it must speed up deregulation and reduce taxes for companies to invest voluntarily.