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Finance minister signals major policy shift to revive sagging job market

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Expansionary fiscal policies, extra budget mulled

By Yoon Ja-young

The finance minister said Sunday that the government will consider modifying economic policies if necessary to cope with the deteriorating job market figures.

"The job market condition seems to have worsened due to multiple factors including structural and economic problems as well as policies. Since diverse problems are comprehensively emerging, it won't be easy to find a solution in the short-term," Economy and Finance Minister Kim Dong-yeon said at the emergency meeting on the job market.

"We will examine the effect of economic policies implemented so far and consider improving or modifying them if necessary, following consultations with related ministries," he said.

Senior officials from the government and Cheong Wa Dae as well as representatives from the ruling Democratic Party of Korea held the emergency meeting following shocking job market data released by Statistics Korea, Friday.

The government, presidential office and the ruling party agreed that an expansionary fiscal policy as well as changes in the labor market were necessary to cope with the deteriorating job situation.

"The role of fiscal policy is more important than ever. Since we are expecting a surplus in tax income, we need aggressive fiscal policies," said Kim Tae-nyeon, head of the DPK's policy committee.

The finance minister said the government will focus on deregulation and changes in the labor market on top of fiscal policies to help job creation.

He said that the administration will implement expansionary fiscal policies next year while speeding up execution of the supplementary budget.

"The government will accelerate innovative growth policies and deregulation to encourage businesses," Kim said.

However, it is still unclear whether any policy shift will be made soon as Jang Ha-sung, presidential chief of staff for policy, has a different view. He made it clear that he still supports the current policies.

"The fruit of economic growth is not being shared by the middle and low-income classes as well as the self-employed due to structural problems. Economic growth is also not leading to job creation," he said, citing structural problems as the reason behind the worsening job figures.

"If the government's income-led growth strategy, as well as policies for innovative growth and a fair economy, start taking effect, the economy will gain vitality and sustainability. I am sure that the low-income and middle classes will be given the fruits, while the job market will also improve," he said.

Economists have been pointing to the steep minimum wage hike as a key factor behind falling job numbers as small merchants and businesses are hiring fewer employees.

The country's hourly minimum wage was raised 16.4 percent to 7,530 won ($6.7) this year, and it is scheduled to rise 10.9 percent to reach 8,350 won next year.

The steep hike is based on the administration's income-led economic growth strategy, which seeks to boost consumption and stimulate the economy by pulling up the income of low wage earners.

While Jang urged that the economic players should "trust the government and wait," the job market is showing only worsening signs.

According to Statistics Korea, Friday, the number of newly added jobs stood at a mere 5,000 in July compared with a year ago, which is the lowest level since January 2010 when the country was suffering from the fallout of the global financial crisis.

The number of the people who have been without jobs for more than six months stood at 144,000 on average between January and July this year, the worst figure since 2000 when it averaged 145,000.

The number of those who have been unemployed for such a long time has been increasing for five consecutive years since 2013 when it marked 63,000. Analysts warn that the government should find a solution for long-term unemployment since people can give up on job searching efforts. On average 507,000 gave up seeking work between January and July this year.

It is also worrisome since young people in their 30s and 40s are being hit the worse. The number of employed people in this age bracket dropped by an average of 140,000 between January and July this year.

"It is not desirable to be too pessimistic about the economy. The government will put in all policy efforts to put the job market back on the normal track and make utmost efforts to help recover dynamism of the market," Finance Minister Kim said.


Yoon Ja-young yjy@koreatimes.co.kr


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