Policy Review

2019 Budget Enshrines
Income-Led Growth, Inclusiveness

The government’s 2019 budget proposal, with a record amount of spending
that focuses on job creation and public welfare, is completely aligned
with President Moon Jae-in’s income-led growth and inclusive economy policies,
aimed at creating an economy that is more fair and more equitable.

Written by Sohn Ji-ae

Fair Share of the Economic Pie

One of the Moon Jae-in administration’s core economic policies is to build income-led growth, to spur economic growth by raising household incomes and by reducing the income gap between households. The policy is part of the government’s overall pursuit of a peoplecentered economy.

With the goal of wage-led growth, the government is seeking a paradigm shift in managing and revitalizing the flailing national economy, so as to bring more jobs to the people and to help individuals get their fair share of the economic pie.

The 2019 budget proposed in late August reflects the very goal of incomeled growth. The government will spend a record KRW 470.5 trillion next year, equivalent to USD 420 billion, a large portion of which will be invested in creating jobs.

Focus Is on “More Jobs”

The employment rate has been rising over the past few months, but at a slower pace. Recent job data seems disappointing, as it showed only 5,000 new jobs were created in July 2018.

Under this new budget, the government plans to spend a record KRW 23.5 trillion to boost employment, 22 percent up from this year’s KRW 19.2 trillion. Around 94,000 new jobs will emerge, mainly in healthcare and social services, along with 36,000 new public servant positions involving public security, like the police. In particular, about KRW 3.8 trillion of that new job spending has been allotted to more than 90,000 new jobs for the elderly, the disabled and for women. Some of that money will provide indirect support for job creation in the private sector, as well, such as increased unemployment paychecks and job training.

Creating more jobs will be a driving force for income-led growth. © shutterstock

Prodding Innovative Growth, Enhancing Social Benefits

The planned budget also aims to create more sources of income in the future. To nurture innovative growth, with the goal of becoming a leader in the fourth industrial revolution, the government will expand investments in research and development (R&D) by 3.7 percent to a record-high of more than KRW 20 trillion.

In addition, KRW 1.5 trillion will be spent on fostering more than 20,000 “innovative individuals” and establishing an economic foundation for three industrial platforms: big data, artificial intelligence (AI) and hydrogen engine technologies. Some KRW 3.5 trillion will be spent directly to support companies that focus on eight core technologies, including self-driving vehicles and technology for the finance industry, or fintech.

In line with a hike in welfare spending to KRW 162.2 trillion, up from this year’s KRW 144.6 trillion, KRW 8.7 trillion will be invested in the new concept of “social overhead capital” aimed at improving the living environment of the general public.

Equitable Economy With Fair
Opportunities and
a Society Without Discrimination

As reflected in the 2019 proposed budget, the government is now focusing its efforts on income being fairly distributed toward the lowest-paid – the elderly, the disabled and women – as opposed to relying on the trickle-down theory.

This move, centered on ordinary people, also falls in line with what President Moon calls an “inclusive nation,” a nation that embraces all walks of life and leaves no one behind.

President Moon has long stressed the value of inclusiveness in executing policies and strategies concerning social issues. In fact, the term “inclusiveness” is currently being championed as a new growth policy in many countries and at international bodies like the IMF and the OECD. “An inclusive society, inclusive growth, inclusive prosperity and inclusive democracy should be the values and philosophy toward which our country must reach,” said President Moon, as he seeks to boost the income of those in lower income brackets.

Income-led growth and an inclusive society: these two strategies are designed to enrich the lives of ordinary people. As income and wealth inequality has been deeply rooted across society, and as it keeps expanding, it’s welcoming that the government is now looking to the people and that it is pursuing a more fair and more equitable economic model with peoplecentered policies.

Hopefully, the strategies will be carried out as planned and lay the foundation for a truly inclusive state.