The government this week announced its economic policy plan for the second half of this year with the goal of putting the country’s economy on the path to a complete recovery.
The Ministry of Economy and Finance, which drew up the plan, revised up its 2021 growth outlook for Asia’s fourth-largest economy to 4.2 percent from its previous estimate of 3.2 percent in December.
To meet this raised target, the government will implement measures designed to prop up domestic demand and reduce the widening income gap while stepping up policy efforts to ensure that outbound shipments from the country reach $600 billion this year. Exports, which account for half of the country’s economy, are set to extend on-year gains for an eighth straight month in June.
The government’s growth target for 2021 is higher than the Bank of Korea’s projection of 4 percent and the International Monetary Fund’s estimate of 3.6 percent. The South Korean economy shrank 0.9 percent last year, recording its first annual contraction since the 1997-98 Asian financial crisis.
The fall in the gross domestic product was attributed not only to the COVID-19 pandemic but also to ill-conceived policies pursued by President Moon Jae-in’s administration, which have been criticized for dampening corporate activity and making people’s lives harder, particularly young people’s lives.
The economic policy plan for the latter half of the year includes a package of measures aimed at strengthening support for youth.
The government will provide young people from households with assets worth less than 400 million won ($353,000) with a monthly allowance of 500,000 won for six months to help them look for jobs. Young people who rent their homes will be able to take out interest-free loans of up to 200,000 won per month toward their monthly rent. People aged 19-34 will be given 100,000 won every month if they save the same amount of money in a bank account.
It is rare for the government’s biannual economic policy plan to include a range of measures that exclusively support young people. The move has prompted criticism that the Moon administration seeks to win the hearts of young voters with populist cash handout programs ahead of next year’s presidential election while turning a blind eye to the fundamental reasons behind the growing difficulties they face.
Policy efforts should be focused on creating stable, high-paying jobs that enable young people to accumulate assets in the long term.
Instead the Moon government has relied on the expansion of fiscal spending to add mostly low-paying and temporary jobs, which young job seekers tend to avoid. The economic policy plan unveiled Monday calls for the creation of 150,000 jobs for the remainder of the year with taxpayers’ money, in addition to the 1.3 million jobs already set to be created through government-funded employment programs. Yet few of these positions offer the kind of decent career opportunities that young people prefer.
If expanded recklessly, cash handouts could cause moral hazard among young people.
The government should focus on forging business-friendly conditions to encourage companies to increase investment and hire more workers. To this end, regulatory and labor reforms should be accelerated. But the country has in recent years seen more restrictions on corporate activity.
Under the economic policy plan, the government will strengthen support for three strategic industrial sectors -- semiconductors, batteries and vaccines. It will spend about 2 trillion won on facility investments and provide tax incentives for companies in these high-tech areas. But those measures fall far short of the support offered by the governments of other major advanced nations.
The Moon administration’s plan to encourage the reshoring of Korean companies operating abroad is also unlikely to bring many of them home. It lacks the specific measures they asked for, such as a repeal on the ban on building new factories in the vicinity of Seoul.
The application of the shortened workweek to companies with five to 49 employees, starting Thursday, will have a negative effect on business and research activities by smaller firms, including venture startups, and their capacity to increase employment.
The government also needs to improve the educational system to help young people gain the knowledge required for jobs in innovative industries that will serve as new growth engines.
By Korea Herald (
koreaherald@heraldcorp.com)
