Gov’t ridiculed over consumption plan

By Kim Tong-hyung

Government officials are desperate to stoke consumers’ appetite to spend as the country can ill-afford to stick to being a one-trick export pony.

But it remains to be seen whether cutting working days could be the answer for boosting consumption as policymakers make it out to be when rising prices and stagnant wages continue to squeeze living standards here.

According to officials from the Ministry of Strategy and Finance, the ideas discussed for stimulating domestic consumption are highlighted by allowing public sector employees to leave the office earlier and splitting up winter vacation periods at schools to give children more opportunities to nag their parents.

Other proposals discussed in a two-day workshop among Cheong Wa Dae and economy-related ministries last week included providing more generous tax deductions on credit card use and reducing in-house cafeterias at public-owned buildings to encourage workers to spend more on regular restaurants.

Government officials claim that such initiatives will be critical for spurring domestic demand and helping small and medium-sized companies.

``There were a lot of suggestions made by each ministry and the discussions were constructive. Specific policies will be finalized and announced next month after further deliberation on which ideas will work,’’ said vice finance minister Lim Jong-yong.

According to the ministry’s suggestions, the standard working hours of government employees should be adjusted from the current 9 a.m. to 6 p.m. to 8 a.m. to 5 p.m. The traditionally long winter vacations at elementary, middle and high schools should be divided to create longer spring and fall breaks, which government officials say will help vitalize the leisure and tourism industry.

Companies will be required to grant employees alternative holidays for national holidays that fall on Saturdays and Sundays.

``There is resistance over the introduction of the 8 a.m.-5 p.m. working hour, but we believe that more and more people are thinking about the quality of life beyond their office duties, and working conditions should be adjusted accordingly,’’ Lim said.

``We need further discussions with the Ministry of Education, Science and Technology over changing the school vacation format. If we allow school children to spend time with their families during spring and fall when the weather is much better, you could expect a boost in travel demands that will help the domestic tourism industry.’’

It’s uncertain whether the proposals will ever leave the drawing board. Employers are balking at the idea of giving their staff more free time, while the education ministry claims that breaking up the winter vacation will ``shake the foundation’’ of elementary and secondary education.

And for average Koreans, who are enduring stagnant or falling earnings, increasing debt and soaring inflation, the bureaucratic logic that they merely didn’t have enough time to go out and spend is simply baffling; it’s not like their schedules have prevented Koreans from becoming shopaholics, their credit-crunched wallets did, said a Seoul-based public servant, who didn’t want to be named. ``Whoever believes in these arguments needs a brain transplant,” he added.

``Income has been lagging inflation, and record high household debt and increasing interest payments are pressing family finances. The government froze the wages of government workers over the past two years. Now, we are supposed to spend more?’’

Although Korean policymakers are becoming serious about making consumption the next engine for growth, observers argue that the efforts could only go half way unless a bigger share of the gains go to workers and consumers.

Adjusted for inflation, Korean families saw their average monthly income drop 0.9 percent during the January-March period on an annualized basis, the second consecutive quarter that real income has declined year-on-year, according to government figures.

At the same time, average households are spending more on basic expenses such as gas, food and health insurance, and the slow economy appears to have strapped their budget for leisure and education.

Inflation has been at least a point above the government’s 3 percent target throughout this year as the inexorable rise in prices of food, fuel and other essentials continues to squeeze living standards here.

And less than six years after surpassing 500 trillion won in personal debt amassed by Korean consumers, it reached a record 949 trillion won (about $876 billion) in the first quarter of this year, according to the Bank of Korea (BOK).

When combined with unsecured loans, non-interest paying debt and rent deposits, the debt taken on by individuals is believed to have approached 1.4 quadrillion won, about 40 percent more than last year’s gross domestic product.