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2017-11-21 16:56
Biggest challenge is to deal with widening social disparity

On Nov. 21, 1997, Korea requested a bailout package from the International Monetary Fund (IMF) amid the Asian financial crisis.

Many Koreans vividly remember the so-called IMF era as a traumatic time for companies and workers. A recent survey by the Korea Development Institute (KDI) showed more than 50 percent of respondents said the 1997 financial crisis was the toughest economic hardship the nation has faced in the last five decades. Many firms had to either shut down or go through debt workout programs and banks were closed or merged. Many workers and their families were hit by the massive layoffs.

The IMF era resulted in sweeping economic and societal changes. Korea repaid the rescue package earlier than scheduled and carried out restructuring in various industrial sectors. Korea successfully managed to come out of the financial crisis, but there are grave challenges ahead. The first is how to deal with the increasing social inequality and wealth gap.

Korea’s economy has matured since the financial crisis, but Koreans are not necessarily happier or wealthier when compared to 20 years ago. A latest report by the Organization for Economic Cooperation and Development (OECD) showed Korea placed 29th out of 38 member countries in its quality of life index. Korea’s standing on the index has been slipping consistently since 2014.

The quality of life of many working Koreans has worsened since the financial crisis. The main reason for this is the steep rise in irregular workers since the IMF era.

After the massive restructuring during the financial crisis, lifetime employment has become rare as irregular positions increased. Korea has one of the highest proportions of irregular workers among OECD countries.  More than 40 percent of the nation’s paid workers hold irregular positions, resulting in grave social problems, such as the growing tendency among young people to shun marriage and childbirth. People who lost their jobs after the crisis were forced to resort to self-employment, which has driven up household debt.

Another challenge is how to turn around the years of low growth, particularly in the new era of the Fourth Industrial Revolution. The Korean economy grew 2.8 percent last year, a considerable decline from the 5.9-percent growth in 1997. In 1997, the youth unemployment rate was 5.7 percent, but that has shot up to 9.8 percent in 2016.

The Moon Jae-in administration needs to build new growth engines that will bring more jobs and re-energize the Korean economy.

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