[Square] Disaster Relief Is More Urgent for Workplaces That Protect Jobs

Heo Hee-young, Professor, Department of Business Administration, Korea Aerospace University

The crisis in the aviation industry continues. As the recovery of the market devastated by COVID-19 is delayed, involuntary cyclical layoffs have now become the 'new normal' for both labor and management. Korean Air and Asiana are barely holding on through cargo operations, but employee hardships persist and the industry's situation is worsening. The combined operating losses of the four listed low-cost carriers (LCCs)?Jeju Air, Jin Air, Air Busan, and T'way Air?in the first half of the year increased by 10.6% compared to last year, reaching 441.9 billion won.

Is the government fully aware of the severity? Last year, the government lent 540 billion won to LCCs. The 40 trillion won Industrial Stabilization Fund ('Gian Fund'), hastily prepared to support the aviation and shipping industries during the same period, was not even 10% disbursed before it ended. This year, the fund was reduced to 10 trillion won, and only 69.7 billion won was supplied solely to partner companies. What is the problem? It is the stringent support conditions and high interest rates. Paradoxically, the logic of finance, which adds a risk premium, is at play here.

While the industry is struggling, money is flowing in the market. Free disaster relief funds are a clear example. How effective will this emergency policy, which plans to provide 250,000 won to individuals except for the top 12% income earners, be? Since over 11 trillion won is released at once, there will be an immediate effect of increased individual purchasing power. The problem lies in cost-effectiveness. We must first consider which side?businesses or households?should be prioritized.

The situation would be different if there were labor market flexibility like in the U.S., where companies reduce employment when struggling and rehire when management recovers. Support funds given to households with reduced income would be effective. However, Korea’s situation is different, where companies must absorb the shock of COVID-19 without forced layoffs. We must save the struggling workplaces first. There is no policy more important than protecting jobs during an economic crisis. The aviation industry, standing at the edge of a cliff, has exhausted its self-help efforts like small business owners and micro-enterprises. The longer the disaster lasts, layoffs following furloughs may become a reality.

The success or failure of policies depends on whether the planned goals are achieved. Rather than aiming to comfort the public, the priority should be on effectiveness?protecting jobs in crisis with minimal budget input. Effectiveness means the degree to which goals are achieved. It is an ideology of management and administration that prioritizes selection and concentration over efficiency focused on outputs and speed. The growing cries of self-employed people pushed to their limits by strict COVID-19 measures also raise doubts about the effectiveness of supplementary budgets. This is often misunderstood as a populist gesture aimed at winning votes ahead of the presidential election.

As the aviation crisis continues, the Ministry of Employment and Labor has hastily extended support for special employment sectors by 30 days. This support covers 90% of 70% of average wages as furlough pay, but if this ends next month, the only remaining option will be unpaid leave. Even the jobs that have been barely maintained will be threatened. We must not mistake airports crowded with passengers during holidays as a sign of market recovery. 7,300 won, 4,000 won, 2,900 won... these were the lowest prices for seats sold to travelers flying from Gimpo to Jeju during this summer’s peak season. This is the result of redirecting the blocked international flight capacity to domestic routes, causing severe oversupply and dropping the peak season load factor from over 90% annually to the 80% range this summer. The aviation industry’s desperate efforts to maintain planes and personnel, forced to endure hardship, are heartbreaking. Financial authorities must find ways to implement the original purpose of the Gian Fund, which is money piled up but unsold. Disaster relief policies must focus on the side with higher effectiveness to succeed.