[Yeouido Interview] Yoo Kyung-jun "Limitations of Union-Centered Labor System... Need to Explore Job-Specific Welfare"

Interview with Yook Kyung-jun, People Power Party Lawmaker
"Expecting Economic Growth Rate Recovery in the Second Half"
Accurate Statistics Needed to Diagnose Income Inequality

[Asia Economy Reporter Hyunju Lee] Yoo Kyung-jun, a member of the People Power Party (Seoul Gangnam Byeong), who is a prominent economic expert within the party and a former senior economist at the Korea Development Institute (KDI) as well as former Commissioner of Statistics Korea, recently expressed his concerns in an interview with Asia Economy. He said, "If we consider responsibility or alternatives, there are things that cannot be said in politics," adding, "So-called populism actually hinders problem-solving."

Yoo lamented, "Since my time at the research institute, I have had the habit of proposing alternatives, but in politics, there is often no time to reflect and think deeply, which makes it very difficult."

As an example, he expressed regret that the controversy over free rides for the elderly has been buried as a political issue focusing only on who bears the cost, without exploring various policy alternatives for reasonable improvement. He pointed out, "The free ride controversy and pension reform are tasks that must be solved in an aging society," and emphasized, "It is necessary to refer to overseas cases regarding the extent of discounts, income levels, age, and time periods." He continued, "The most important issue is ultimately how to adjust the elderly age. As life expectancy itself is extended, raising the elderly age is inevitable. Accordingly, we must consider not only delaying the pension benefit starting age but also extending the retirement age."

Below is a Q&A with Representative Yoo.

Yoo Kyung-joon, member of the People Power Party. Photo by Kim Hyun-min kimhyun81@

Q. What is the biggest difference between viewing the economy as an economist and as a politician?

A. Economists mainly look at the economy from a long-term perspective. They take sufficient time to review and propose alternatives. However, politicians must provide solutions to various policies and civil complaints as quickly as possible. Another difference is that the position changes from a neutral third party to a stakeholder. If a wrong policy is announced and not immediately addressed, it proceeds as planned, and the damage falls on the people. The responsibility as an elected official increases. For example, real estate taxes such as comprehensive real estate tax and capital gains tax were passed within a day or two using the majority seats as leverage, driven by political controversy rather than economic logic, which caused me great frustration.

Q. Inflationary pressures are increasing domestically and internationally. How do you forecast the economy for the first half of this year?

A. The origin of inflationary pressure started from excess liquidity to overcome COVID-19. On the supply side, the Russia-Ukraine war caused price increases in oil and grains, leading to inflationary pressure. This was a precursor to stagflation, where growth slows simultaneously.

To forecast Korea's economy, an accurate outlook on the global economy is crucial. We need to analyze not only the war but also China's real estate slump, reopening, and U.S. interest rates, inflation, and economic policies, because Korea mainly exports semiconductors and automobiles, which are sensitive to external conditions.

Korea's economic growth rate in the first half is likely to fall below the Bank of Korea's previous forecast of 1.3%, possibly around 1%. However, if China's real estate market stabilizes and its economy recovers due to a decline in COVID-19 cases in the second half, Korea's economic growth rate is expected to recover more than previously forecasted. However, caution is needed because combining contradictory monetary and fiscal policies, such as the UK's 'Growth Plan 2022' which involves fiscal expansion and monetary tightening, could intensify financial instability.

Q. The Yoon Seok-yeol administration is emphasizing labor reform. How should the new labor system and labor organizations change?

A. Just as monopolies have drawbacks in companies, labor unions also have drawbacks due to monopoly, which is called the two faces of unionism. Considering the structural problems of Korea's labor system, when labor unions do not function properly in reality, other alternatives also fail to play their roles effectively. Especially in small businesses, unionization rates are 10.8% for 100-299 employees, 2.2% for 30-99 employees, and 0.1% for fewer than 30 employees. Under the current labor union-centered system, the representation rights of workers in small businesses cannot be properly exercised. Even in Germany, there are systems like works councils that can represent workers without being unions. Sometimes, it is necessary to seek systems that respect partial opinions depending on job or department characteristics, as there may be wage systems or welfare programs suitable for them.

Yoo Kyung-joon, member of the People Power Party. Photo by Kim Hyun-min kimhyun81@

Q. The aging population issue mentioned earlier is also a serious social issue. It ultimately leads to controversies over free rides and pension reform. What kind of consensus should be approached?

A. Regardless of the need for government subsidies, various policy approaches are needed to improve the current free ride system. If the system is well managed, the social benefits for transportation-vulnerable groups may outweigh the losses from free rides. As you know, Korea entered an aging society in 2017 when the elderly population over 65 exceeded 14%. It is expected to enter a super-aged society with over 20% elderly population by 2026. The free ride controversy and pension reform are tasks that must be solved in an aging society. It is necessary to refer to overseas cases regarding discount rates, income levels, age, and time periods. In the U.S., trains, buses, and subways offer 30-50% discounts; in the U.K., those over 65 with income below a certain level and those over 60 unable to work receive free national rail, bus, and subway rides outside peak hours; in Japan, discounts are given only to applicants over 70, with a certain amount borne by the individual depending on income level. The most important issue is ultimately how to adjust the elderly age. As life expectancy extends, raising the elderly age is inevitable. Accordingly, we must consider delaying the pension benefit starting age and extending the retirement age.

Q. South Korea is classified as one of the countries with deepening polarization. How can income inequality be resolved?

A. It is currently difficult to answer whether Korea is a country with deepening polarization. Accurate statistics are needed for a precise diagnosis, but the Moon Jae-in administration distorted statistics. For example, the income distribution indicator. According to the official Korean income distribution statistics from the Household Finance and Welfare Survey, Korea's income inequality is internationally quite high but has been improving annually since 2011. This means Korea is a country where polarization is improving, not worsening. However, the Household Trend Survey, which was restructured in 2019 at a cost of over 10 billion won during the Moon administration, showed Korea as a highly unequal country before restructuring and as an equal country internationally after restructuring. This is like a comedy. Correcting such statistical distortions is essential to develop proper measures to alleviate income inequality. Fortunately, the Board of Audit and Inspection is conducting an audit on these statistical distortions, so we expect to see accurate statistics measuring Korea's income inequality in the future. If Korea is a country with severe income polarization, efforts should be made to expand social safety nets such as the National Pension and Employment Insurance to improve income distribution. Otherwise, more investment can be made to enhance growth potential.