The heated debate over President Moon Jae-in's “income-led growth” policy shows little sign of abating, despite the government firm stance for continuing the policy.
Of course it is importance to maintain policy coherence if we want to see any policy measures, particularly economic ones, produce successful results on a long-term basis.
In that sense, it is right for Moon to vow to keep pushing for his signature policy regardless of its poor performance. But we have to call into question his awareness of the stark economic reality.
In a speech to the national convention of the ruling Democratic Party of Korea (DPK) Saturday, Moon said the employment situation has improved both quantitatively and qualitatively. It is hard to find any evidence supporting his remarks.
Needless to say, Moon has so far failed to create jobs. The number of employed people increased a mere 5,000 in July from the same month last year, the lowest since January 2010. The figure is far short of his job growth target of 320,000.
How could the President think the situation has improved despite the failure? He was apparently just trying to ignore the poor scorecard. He was also attempting to justify his policy in the face of mounting public criticism for the decline in new jobs and the widening income gap between the rich and poor.
According to Statistics Korea, those in the bottom 20 percent income bracket saw their nominal monthly income contract 7.6 percent to 1.32 million won in the second quarter from a year ago. This is the biggest drop for a second quarter in the 15 years since such data has been compiled.
As a result, the income gap between the haves and the have-nots has only widened. The top 20 percent income bracket's disposable income was 5.23 times larger than that of the bottom 20 percent. This is the widest gap since the second quarter of 2008.
If the President and his policymakers refuse to accept the deteriorating job and income data, they can hardly map out a new strategy to rectify the unintended consequences of the inclusive growth policy.
Presidential policy chief Jang Ha-sung, an architect of Moon's income-led growth policy, is also stubbornly sticking to it. On Sunday, he made it clear the government won't drop or change its policy. He went so far as to emphasize the need to accelerate the economic initiative.
What's really worrisome is that the country is not ready to embrace the higher minimum wage, one of the core elements of the inclusive growth policy. Small businesses and the self-employed have continued to reduce hiring in their desperate efforts to cut soaring labor costs since the minimum wage jumped by 16.4 percent this year. Worse, the wage will climb by a further 10.9 percent next year.
Simply put, the country's economy has structural weaknesses. Its growth has long depended on low wages of irregular workers and part-timers. So it is more urgent to take comprehensive measures to tackle such weaknesses. In this context, President Moon and his economic policymakers should have a flexible attitude and come up with a new strategy to rectify the side effects of income-led growth.