South Korea strives for more labor-friendly growth and financial equality
President Moon aims for a 'complete paradigm shift' calling for more transparency, support for small businesses, and broader social safety nets for the unemployed.
Seoul, South Korea—South Korea's new leadership has promised to help many left behind as the country grew prosperous, laying out a new five-year economic plan that promises to boost incomes and improve the country's sagging social safety net.
The labor-friendly economic blueprint released Tuesday by the finance ministry is aimed at addressing mounting concern over growing inequality. It calls for sharply increasing the minimum wage and unemployment benefits and imposing bigger fines for unfair business practices.
It also includes measures aimed at improving labor conditions, such as reducing South Korea's notoriously long working hours, which are the second-highest among the developed countries.
President Moon Jae-in said it marks a "complete paradigm shift" in the South Korean economy, according to a presidential pool office report on a Cabinet meeting Tuesday.
The plan also calls for better transparency and governance at South Korea's family-controlled big businesses, or chaebol, and addressing unfair dealings between big companies and their small contractors.
Mr. Moon, who was elected president in May after his predecessor Park Geun-hye was ousted in a corruption scandal, told his ministers he wants South Koreans to feel their country is fair and just.
"The beginning of the new paradigm will be people," Finance Minister Kim Dong-yeon told reporters. "To shift the paradigm, the future economic policy will focus on four directions: income-driven growth, jobs-focused economy, innovation, and fairness."
Moon took office promising to put jobs and workers first.
By 2022, the minimum wage will reach 10,000 won ($9) per hour, up about 30 percent from 2018. Government subsidies for babies, young job seekers, and the elderly will be increased while the unemployment benefits will go up by 10 percentage points.
Companies and local governments will enjoy tax incentives and more government funding if they create more jobs.
It also seeks to reduce South Korea's notoriously long working hours, which are the second-highest among the developed countries, it said.
The ministry raised its growth forecast for Asia's fourth-largest economy this year to 3 percent from its earlier outlook of 2.6 percent, citing a recovery in exports and the government's stimulus plans. Next year, increased household income and more jobs will help support the economy to achieve 3 percent growth, it said.
Those forecasts are more optimistic than those of other domestic or international institutions, which predict an upper 2 percent growth for the economy.
South Korea's economic recovery has been gaining steam as tech companies like Samsung and SK Hynix log record profits thanks to strong demand for computer memory chips.
But individual Koreans are feeling left out and have scant social safety nets to rely on when they lose jobs or become too old to work. Young college graduates fret over the high jobless rate among youths and poverty among the elderly is the highest among developed countries. The country has also struggled with stubbornly low birth rates for more than a decade.
Consumer demand has slowed amid high levels of household debt, lagging incomes, and a widening gap between workers with full-time regular jobs at big companies and those with irregular jobs or working at small companies.
Moon's economic strategy marks a departure from the chaebol-centered growth model that is a legacy of Mr. Park's father, dictator Park Chung-hee. The big family-controlled businesses, supported by cheap government loans, helped drive the country's rapid industrialization but often at the cost of grim labor conditions and outright collusion between government officials and businessmen.
The scandal that ousted Park renewed pressures to end such corruption and to reform the chaebols, whose domination of the economy is thought to be stifling competition and hindering innovation.