Social Trust Cures 'jobless Growth' Disease

By Dr Jeffrey I Kim

On Nov. 9, President Moon Jae-in replaced two economic policy chiefs.

His new picks are presidential chief of staff for economic policy Kim Soo-hyun and finance minister nominee Hong Nam-ki.

Kim, who served as presidential social affairs secretary, succeeded Jang Ha-sung who was sacked for failing to create jobs and reinvigorate the slumping economy.

Kim vowed to support Hong who will serve as an economic 'control tower' when he officially replaces Kim Dong-yeon as economy and finance minister after undergoing a National Assembly confirmation hearing.

Kim told the reporters, 'I will go anywhere and meet anyone if my visits help create more jobs.

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Hong, a veteran economic bureaucrat who is currently serving as chief of the Office for Government Policy Coordination under the Prime Minister's Office, publicly pledged to carry out President Moon's three key policies ― income-driven growth, innovation, and fair competition.

The two new policy chiefs seem to have a strong belief that income growth will surely bring about many new jobs.

However, not many people are aware there would be a long and rough road going from growth to hiring. Job creation depends on an increase in investment which is contingent upon business expectations.

If firms have a bleak business outlook, they would not undertake large-scale investment projects. Instead they may invest their money in the stock market.

Top policymakers in any country have a strong interest in raising employment during their term

Arthur Okun, the late economics professor at Yale, served as chair of the Council of Economic Advisers in the late 1960s. He was the very person who coined Okun's law.

He first noticed there was a close connection between falling unemployment and the growth rate of real GDP. Employment tends to increase and the unemployment rate tends to decline when the real GDP growth rate is high.

Okun's law states that unemployment remains constant when real GDP growth rate is 3 percent, unemployment declines when real GDP is above 3 percent, and unemployment increases when GDP growth is below 3 percent.

Statistical regularity about the relationship between income, growth and employment may vary from country to country.

For some periods of time, Okun's law was globally popular but it is not as relevant now because the economic structures in many countries have changed.

In September, Statistics Korea and the Bank of Korea released a gloomy report that the employment...