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Out of touch with reality

Jan 03,2019
The Year of the Golden Pig, which promises prosperity and wealth, has dawned. But sadly, Korea’s economic outlook can hardly match the year of abundance. The self-employed and small business owners who were devastated by the 16.4 percent jump in the minimum wage must also get ready for another 10.9 percent wage hike starting this month.

Despite protests, the government endorsed a revision to the minimum wage act on the last day of 2018. Statistics show that although the nominal increase is 10.9 percent, the actual payout will surge by 33 percent when counting weekly break allowances in the base wage as a result of the revised act. We cannot know the exact ramifications on the fragile job and consumption front.

Macroeconomic prospects are equally dim. The estimated growth, which was downgraded to 2.7 percent for 2018 from 3.0 percent in 2017, is expected to stop at around 2.5 percent this year. Mainstay industries have lost competitiveness, spreading lethargy across investment, production and employment. External conditions have worsened with slowing in global economy and trade frictions between the world’s two largest economies. The downsides outweigh the upsides.

Policymakers remain oblivious and relaxed. During a year-end lunch with ruling party leaders, President Moon Jae-in complained that economic achievements have been misrepresented to the public due to society’s paranoia about economic failures. Ruling Democratic Party Chairman Lee Hae-chan said that despite criticism from the media, the data shows that economic fundamentals are improving. The self-congratulatory mood of the inner circle contrasts with reality. Jobs and income disparities are at crisis levels. Business and consumer sentiments are both pessimistic. If they had eyed the data well, they could not have been so self-indulgent.

In his New Year’s message, Moon said he would work harder to improve the livelihoods of all. Ideology won’t help him fulfill that promise: what the president and his aides need is a better awareness of reality and practical policies.

JoongAng Ilbo, Jan. 2, Page 30