Value context and insight. lkm@koreatimes.co.kr
'More Herculean effort needed' to revive economy
Sohn Sung-won
By Lee Kyung-min
By Lee Kyung-min
South Korea must put a top priority on tackling two urgent issues ― its declining productivity and population ― to prevent its economy from slipping into a structural low growth trap, Sohn Sung-won, an economics professor at California State University-Channel Islands, said Thursday.
To that end, he called for the country to make a “Herculean” effort to push for regulatory reforms while introducing more technical education programs.
He said that the fast-falling labor productivity is all the more grave cause for concern given it is a major component of economic growth alongside the workforce and capital.
“Unfortunately, (Korea's) productivity growth has been decelerating, a worrisome omen for the economy. We are well aware of the demographic trend in Korea,” Sohn told The Korea Times via email.
The assessment followed a recent study published by the Korea Economic Research Institute (KERI) which said Korea's per-person productivity grew only 2.8 percent year-on-year between 2010 and 2017.
Korea came in 28th out of 41 countries. Labor productivity at 3.5 percent was much lower than the average.
The institute said the figure is particularly worrisome because the rate prior to the global financial crisis was 7 percent between 2002 and 2009, which ranked Korea fifth out of the 41.
Sohn believes that what is of more concern is that the falling productivity coincides with the country becoming a fast-aging society with a record-low birthrate.
According to Statistics Korea, the birthrate ― the number of babies a woman chooses to have during her childbearing years ― fell below 1 to 0.98.
This was the lowest since the 1970s when the authorities began compiling related statistics.
The figure means only 326,900 babies were born in 2018, down 8.6 percent from a year earlier.
The “dismally low” birthrate adds new concern to a demographically challenged country already reeling from an “aged-society,” defined by the number of elderly aged 65 and older accounting for at least 14 percent of the total population. Korea first became an “aged-society” in 2016.
Sohn suggested deregulation and education as two among various areas that can be used to reverse the current trend.
“The Korean government should try to reduce regulations. True, the government has made attempts to cut red tape, but not enough. A more Herculean effort is needed.”
He floated the idea of introducing incentives to induce more young people into science, engineering and technology.
“Koreans receive a lot of education, but not enough technical education. Perhaps, some incentive system should be structured to better solve the problem.”
Meanwhile, the former U.S. presidential economic adviser expects manufacturing to be a diminishing share of total employment.
“In the U.S., for example, the manufacturing share fell below 5 percent from over 50 percent in the 1950s. Korea ― an advanced economy like the U.S. ― will see the same trend. On the other hand, some aspect of manufacturing ― for example microchips ― will remain important.”