Authorities should push for deregulation
The two pillars of the Moon Jae-in administration's economic policy are income-led and innovation-driven growth. The two need to push and pull each other so the economy can achieve balanced growth. This means the authorities should produce an appropriate policy mix to let the two elements complement each other.
However, in reality the government has so far sought the lopsided policy of preferring income-led growth to innovation-pulled one. In other words, the liberal administration has so far been engrossed in stimulating growth by increasing pay for workers, especially low-income earners.
In this situation, innovation-fueled growth has been put on the backburner. President Moon and his economic policymakers have only shouted the empty slogan of promoting this, which explains why the economy is losing its vitality and heading for a long-term slowdown or more correctly a recession.
In fact, the center-of-left Moon government has focused on the redistribution of wealth to allow lower paid workers to have an equal share of the economic pie. This focus is a far cry from the traditional export-oriented growth model which culminated in the Miracle of the Han River in the 1980s and 1990s.
No one can deny the export-led formula has caused a lot of problems such as the concentration of wealth in the hands of a small number of conglomerates, or family-run chaebol. It has also widened the wealth gap between the rich and the poor. For these reasons, previous governments in the 2000s -- conservative and liberal -- tried to set out a new growth model to reduce the excessive reliance on exports by stimulating domestic demand.
Then the two conservative governments under Lee Myung-bak and Park Geun-hye only deepened the economy's dependence on exports. Lee's catch phrase for a new growth engine was "low-carbon, green growth," while Park's was "creative economy." But such slogans went nowhere.
Against this backdrop, it might be natural for President Moon to promote an income-led growth policy. Moon has also adopted the innovation-driven growth policy in order to find a new growth engine. At the core of income-led growth is the steep and rapid increase of the minimum wage.
Moon has promised to raise the hourly minimum wage to 10,000 ($8.85) won per hour by 2020. So it was increased 16.4 percent to 7,530 won this year. And Friday, the Minimum Wage Commission decided to ramp it up 10.9 percent to 8,350 won next year. But this steep increase is putting more of a burden on businesses. Smaller enterprises, which are feared to suffer the most, have threatened to boycott the minimum wage hike.
Now the question is how to address the brewing conflict between employers and workers. More than anything else, the country should increase the economic pie so all economic players can take a bigger and fairer share. That's why the government should push for innovation-driven growth more aggressively. For this, it is imperative to press ahead with deregulation to promote innovation. Without innovation, the income-led growth policy stands little chance of success.
The two pillars of the Moon Jae-in administration's economic policy are income-led and innovation-driven growth. The two need to push and pull each other so the economy can achieve balanced growth. This means the authorities should produce an appropriate policy mix to let the two elements complement each other.
However, in reality the government has so far sought the lopsided policy of preferring income-led growth to innovation-pulled one. In other words, the liberal administration has so far been engrossed in stimulating growth by increasing pay for workers, especially low-income earners.
In this situation, innovation-fueled growth has been put on the backburner. President Moon and his economic policymakers have only shouted the empty slogan of promoting this, which explains why the economy is losing its vitality and heading for a long-term slowdown or more correctly a recession.
In fact, the center-of-left Moon government has focused on the redistribution of wealth to allow lower paid workers to have an equal share of the economic pie. This focus is a far cry from the traditional export-oriented growth model which culminated in the Miracle of the Han River in the 1980s and 1990s.
No one can deny the export-led formula has caused a lot of problems such as the concentration of wealth in the hands of a small number of conglomerates, or family-run chaebol. It has also widened the wealth gap between the rich and the poor. For these reasons, previous governments in the 2000s -- conservative and liberal -- tried to set out a new growth model to reduce the excessive reliance on exports by stimulating domestic demand.
Then the two conservative governments under Lee Myung-bak and Park Geun-hye only deepened the economy's dependence on exports. Lee's catch phrase for a new growth engine was "low-carbon, green growth," while Park's was "creative economy." But such slogans went nowhere.
Against this backdrop, it might be natural for President Moon to promote an income-led growth policy. Moon has also adopted the innovation-driven growth policy in order to find a new growth engine. At the core of income-led growth is the steep and rapid increase of the minimum wage.
Moon has promised to raise the hourly minimum wage to 10,000 ($8.85) won per hour by 2020. So it was increased 16.4 percent to 7,530 won this year. And Friday, the Minimum Wage Commission decided to ramp it up 10.9 percent to 8,350 won next year. But this steep increase is putting more of a burden on businesses. Smaller enterprises, which are feared to suffer the most, have threatened to boycott the minimum wage hike.
Now the question is how to address the brewing conflict between employers and workers. More than anything else, the country should increase the economic pie so all economic players can take a bigger and fairer share. That's why the government should push for innovation-driven growth more aggressively. For this, it is imperative to press ahead with deregulation to promote innovation. Without innovation, the income-led growth policy stands little chance of success.
![[INTERVIEW] North Korean defectors bear brunt of remittance scams](https://img.koreatimes.co.kr/upload/thumbnailV2/75c261156ac7415fad92dc1d7c1b30cf.jpg/dims/resize/178/optimize)
![[INTERVIEW] Foreign-born entertainers seek to revolutionize local industry](https://img.koreatimes.co.kr/upload/thumbnailV2/4a6b2bd3d23044d699dee3c5bb956863.jpg/dims/resize/178/optimize)
