South Korean economic policymakers say they are facing immediate 'deadlines' for reformsMadeinkoreablog
South Korea faces key self-imposed deadlines in the coming weeks in untangling the labor market, government workers’ pension plan as well as laws waiting to be passed at the parliament, and policymakers stress that the outcome will determine the future course of the national economy.
The government deadline for broad labor market reform is the end of March, while an agreement on reforming the pension plan is required by Saturday. Minimum wage talks linked to labor market reforms need to be concluded in April.
The heart of labor market reform is overhauling the so-called dual market, which refers to the gap between full-time regular employees, who enjoy job security, and non-regular workers, whose employment is tenuous and who are usually paid less.
Despite the lack of time, the Economic and Social Development Commission in charge of drawing up the reform plans is deadlocked on many key issues.
Both the government and management want to create a flexible labor market to make it easier to hire and fire people, while narrowing the difference among workers in job security, welfare benefits and wages.
Observers say that even with an agreement by the tripartite government-labor-management committee, there is no guarantee that companies and workers will follow guidelines.
Ryoo Jae-woo, an economics professor at Seoul’s Kookmin University, said the ESDC may not represent all interested parties, making it hard for real consensus to be reached.
But an agreement can clarify a lot of uncertainties in the labor market, he said.
“A meaningful compromise could potentially help employment and investment,” Ryoo said.
But others, such as Park Su-keun, a labor law professor at Hanyang University, are skeptical about the way the government was approaching labor reforms.
“The tripartite commission is doing its best, yet they have not really worked out the finer details,” the scholar argued. He called for a slow and steady approach to build consensus, stressing that the deadline is not important.
The government is reworking the government employee pension plan, which has taken flak for giving too much to civil servants at the expense of ordinary taxpayers.
“There has been some progress made between the ruling and opposition parties that may allow an agreement to be reached,” said a finance ministry source, who declined to be identified.
The government is also pushing companies to raise their minimum wages in 2016, hoping that more income would fuel consumption and help reduce debt burden.
Employers say that raising their minimum wages will eat into their already thin profits.
These three reform measures are important, policymakers say, because they can lay the foundation for changes in the financial and education sectors.
The financial sector has taken criticism for being too slow to meet market demand and provide necessary funds, while South Korea’s education system has been accused of churning out people that do not have the skills required by companies.
Policymakers are also calling for the passage of laws by the parliament over the next couple of weeks to breathe new life into the service sector, tourism and corporate funding, and enable better oversight over financial institutions and subcontracting rules.
Government officials fear that without timely action, South Korea’s economy could fall into hard times.
The Bank of Korea has hinted it may adjust down this year’s growth target, which is set at 3.4 percent. The predictions made by the central bank and think tanks are lower than the 3.8 percent target set by the finance ministry, which in recent weeks has started to acknowledge that growth so far is not up to earlier expectations.
Policymakers repeat that while the economy is recovering, the pace is slow and inconsistent, with industrial production, consumption, investment and exports all failing to meet prior projections.
There is wide consensus that first-quarter growth will be in the zero percent range, marking the sixth quarter in a row that numbers have stayed under 1 percent.
Finance Minister Choi Kyung-hwan has said on numerous occasions that the next few weeks are absolutely critical, with headway needed to be made on reforms within the month, so tangible gains can be made afterward.
He said he wants to create “effective demand” in the domestic market that can vitalize the economy, and the way to do this is by reaching consensus on the three reforms. (Yonhap).