John Burton
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In his case, the economy is proving to be his most vulnerable point. After all, it was his promises to improve the economy, not his proposals about North Korea that got him elected in May 2017.
His economic record is a tattered one. The number of employed persons rose by only 97,000 in 2018, the lowest increase since the global financial crisis a decade ago. The number of jobs in the private sector actually fell by 16,000, and the overall job figure only rose due to increased hiring by the government.
Last year's unemployment rate of 3.8 percent was the highest since 2001 and the total number of unemployed persons approached levels last seen during the financial crisis of the late 1990s. The youth unemployment rate is at a 19-year high.
These are embarrassing statistics for an administration that promised to boost economic growth and incomes. The poor economic performance has been blamed on Moon's policy of rapidly raising the minimum wage and imposing shorter work hours when the economy is already slowing and the manufacturing sector is undergoing disruptive restructuring due to increased foreign competition.
Businesses are reluctant to hire during a downturn, especially when they are required to pay higher wages. As long as the business situation does not improve, jobs will continue to disappear.
The heaviest burden is falling on the economically vulnerable, the people that Moon wanted to help the most. Low-income workers are mostly likely to be hired by small businesses. But these businesses can't afford to do so when labor costs are increasing. The result is that income inequality is increasing since those with higher salaries are usually employed by companies with more robust finances.
The intention of the Moon administration was a good one in the sense that it thought it could boost economic growth through increased consumer spending caused by a rise in incomes, but it has backfired due to a central contradiction.
The minimum wage hike has instead slowed down economic growth by increasing unemployment and depressing business investment due to rising labor costs, outweighing the expected increase in consumer spending due to higher wages.
An increase in wages, without a corresponding increase in productivity that has remained stagnant, is contributing to Korea's loss of competitiveness. This will mean fewer new hires in the future as companies scale back or even close operations.
The economy appears to be caught in a vicious cycle when manufacturing industries are already shedding jobs as they face increased competition from China, weaker overseas demand and a looming global trade war.
A recent hike in the interest rate to 1.75 percent by the Bank of Korea has not helped matters. The monetary tightening, which will increase household debt and thus depress consumer spending, is puzzling in face of a weak economy and a lack of inflationary pressure.
The government has already been forced to revise its downward its economic growth forecast for 2019 to as low as 2.6 percent, while private economists believe that it will 2.5 percent. The economic troubles have also been reflected in the Seoul stock market, with the KOSPI Index falling by 18.5 percent in 2018, one of the worst performances among global markets. Little wonder that Gallup International found in recent polling that South Koreans showed the lowest rate of optimism among 18 countries surveyed and the second highest rate of pessimism at 41 percent.
The bad economic news is taking a toll on President Moon's popularity, whose approval rating has fallen from around 80 percent in May, which reflected euphoria over his reconciliation moves with North Korea, to 46 percent at the end of 2018.
Continuing economic problems could affect the future of the president's North Korea policy if the ruling Democratic Party loses seats in the National Assembly elections in April 2020 to the conservative opposition. A loss of seats would undermine Moon's political position, complicating his efforts to pursue rapprochement with Pyongyang.
Moon may be able to save the situation if he is willing to adopt a more flexible attitude and modify his economic policy. He already ditched his finance minister and chief presidential policy adviser in November and replaced them with more pragmatic officials, although critics accuse Moon of still being recalcitrant.
One way that Moon could reverse course is if he adopted a tailored approach on incomes-growth policy by not applying the minimum wage requirements and shorter work hours to some categories of small and medium businesses, such as restaurants and corner shops.
John Burton (johnburtonft@yahoo.com), a former Korea correspondent for the Financial Times, is now a Washington, D.C.-based journalist and consultant.
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