Tag Archives: paradigm-shift

South Korea – The President Wages War to Increase Wages

President Moon Jae-in pledged to “yield the president’s imperial power to the people” when he took office on May 10, 2017, and the first 130 days suggests that the President is making good on his word. In particular, in addition to appointing reformists, critics, and former civil-activists to executive offices, the President has taken by the horns two onerous issues: tax increase and wage increase. Specifically, to fund the President’s initiatives on job creation and wage increases, the President will seek to increase taxes on conglomerates as well as high-income earners. The tax hike will need to pass the National Assembly, where the ruling Democratic Party has only 120 of the 299 total seats. Still, at a time of growing income inequalities, job insecurity, stagnant wages, and loss in political and economic confidences, the President’s “paradigm shift” to push for economic growth through wage increases that will increase consumption, rather than rely on labor reforms such as the wage-peak system advocated by previous conservative-governments that aimed at increasing recruitment, has seen his approval ratings remain at peaks of 80 percent and more. Perhaps what is more notable about President Moon’s initiatives is the transparent, open-discussion of their complementarity and necessity. That may be the distinguishing, all-important step towards a successful policy.

Clearly, President Moon is not the first president to come into office promising equity and support for workers: his disgraced predecessor, the impeached President Park Geun-hye, championed economic democratization following her successful 2012 election that was subsequently diluted to a 474 vision (4 percent GDP growth, 70 percent employment and $40,000 per capita income); before President Park, President Lee Myung-bak’s administration pushed for the 747 goal (7 percent economic growth, $40,000 per capita income and becoming the world’s seventh-largest economy).

But, unlike these predecessors, President Moon has followed through on his plans. The Minimum Wage Commission has announced the 16 percent wage rise to 7,530 won ($6.60) per hour from 2018. To ensure that small and medium-sized enterprises are able to meet the new wage increases, as well as to fund the new wage increases and job creation policies, the President has called for new taxes. Indeed, the President has distinguished himself even from political contemporaries in calling for the tax hikes: by way of contrast, the Liberty Korea Party (formerly Saneuri Party) called the President’s policy a “dreadful tax bomb” while the People’s Party and the Bareun Party – both of which had agreed on the necessity of tax hikes – criticized the government’s plans for the hike.

This departure is significant: across the globe, austerity economics where incumbents or opposition seek to tighten wasteful spending while pledging to control big business has lost credibility with large swaths of the electorate. In South Korea, surveys conducted by Gallup Korea estimated the number of undecided voters at 27 percent in the last election, and that was an increase by six percent from December 2015. Clearly, there is a growing “party”-apathy among voters. This is not synonymous with political apathy: events such as the strong candlelight protest rallies that fueled the former President Park’s impeachment show public passion and involvement. What party-apathy signifies is the lack of outlets for that passion and involvement in the form of issues and platforms of the political parties. President Moon’s initiatives – or, more precisely, his departures from standard party stances – may be the antidote to party-apathy that will ignite political passion and, correspondingly, policy success.