SEOUL- When Lee Gyu-il, 55, a veteran banker at South Korea’s largest lender lost his job early this year, he felt he had little choice but to set up his own business, joining the ranks of a legion of older workers feeling stuck in an economic rut.
For the past month, Lee has been selling hearing aid devices at a corner of an ear clinic in the western city of Incheon. He ended his 29-year career with Kookmin Bank when he was placed under a wage peak program that cuts wages of employees past a certain age every year until they retire.
“The whole country is just sending out long-serving workers in the name of creating jobs for the youth without making sufficient effort to create new jobs,” Lee said.
That program is among several that President Moon Jae-in’s government is using under a growth model whose signature policies include a hefty rise in minimum wages, creation of more public-sector jobs and a shorter working week.
Moon came into office in May 2017 promising to create jobs, raise wages and boost domestic demand. Instead his policies have led to rampant unemployment as thousands of small businesses were shuttered, slowed the economy to a crawl and forced the government to spend billions of dollars in handouts to the youth and jobless.
As growth falters in South Korea from a domestic spending slump and trade frictions, companies burdened with higher wage costs have cut jobs or given up hiring. The cap on work hours has also reduced workers’ salaries and posed another regulatory hurdle for employers.
Yet, even as thousands of workers take to the streets to strike against job conditions, the president has asked parliament for a massive expansion in next year’s budget that he says is needed to fight “grave economic conditions”.
Investors and Koreans worry the new budget will be more of the same ineffective fiscal policy, with proposals to pour money into creating jobs and welfare. And if the government’s aggressive spending fails to lift the economy out of the mire, more Koreans will find themselves relying on handouts to get by.
“Higher fiscal spending is OK, but when private sector vitality weakens, a grand shift in the government’s policy stance is needed,” said Lim Young-tae, head of economy analysis team at the Korea Enterprises Federation, an employers’ group.
“However justifiable, the current government’s economic policies are executed too hastily.”
Moon’s approval ratings have fallen to half the 84 percent peak when he took office, and respondents to polls have cited economic mismanagement as the top reason.
To be sure, the government has significantly expanded benefits for the poor and elderly, which have long lagged global standards despite the country’s rapid economic development. – Reuters