Moon and Macron, Both Starting at the Same Time, Take Opposite Approaches to `Job Creation`

Since taking office, French President Macron and President Moon Jae-in have consistently been compared with each other. That is because both took office in May 2017 with high approval ratings and shared a commitment to making job creation their top national priority. Although their policy goals were the same, the two governments chose very different paths to achieve them, and their results have also diverged sharply.

Macron’s solution to job creation is straightforward. Based on the belief that jobs are created by businesses, he began by easing regulations on companies. He made hiring and firing easier so that firms could expand employment, and he reduced the power of labor unions. He also significantly cut the corporate tax rate, which had been among the highest in the eurozone, and abolished the wealth tax.

France had long been a country where unions held strong influence, to the point of becoming the first in the world to adopt a 35-hour workweek. Working less while receiving higher wages than in other countries led to chronic low growth and high unemployment. Macron concluded that to cure this “French disease,” pro-business and labor market flexibility policies were necessary. However, he faced criticism that his policies were only for the rich and for big business. Refusing to compromise with union opposition, President Macron persuaded the public by saying, “Helping businesses is not for the rich. It is for the country, and protecting businesses is precisely how we protect workers.”

Macron’s choice was the right one. Contrary to widespread fears that making dismissal easier would reduce jobs, employment actually increased. As the burden of firing employees fell, companies voluntarily began to hire more workers. As tax burdens eased, investors and companies that had left France to avoid regulations began returning, and new jobs were created through fresh investment. Employment among young people, in particular, rose significantly. Since Macron took office, 367,000 jobs have been created, and the youth unemployment rate, which had reached 23%, fell to 19.2% within just two years of his presidency.

At the same time, his government has pursued policies to improve the quality of labor so that people do not lose their jobs. While the Macron administration allows firms to dismiss workers more easily, it also helps workers quickly find new employment in response to changing market conditions. Creating a vocational training app that connects users to 350,000 training programs offered by the private sector is part of that effort. The government believes that rather than handing out welfare, the state’s role is to give people the freedom to choose their own jobs.

For a “working France,” Macron is also attempting to reform welfare policy and the pension system. The goal is to strengthen incentives for people to increase their income through work rather than relying on state subsidies. His government has increased the minimum required working hours to qualify for unemployment benefits and plans to reform the pension system so that retirement can be delayed.

The Moon Jae-in administration’s approach to job creation differs greatly from Macron’s from the outset. It chose a method of directly raising workers’ incomes through pro-labor policies. It sharply increased the minimum wage and introduced regulations such as converting non-regular workers into regular employees and shortening statutory working hours. To expand funding for welfare, it raised the top corporate tax rate from 24.2% to 27.5%.

The government has also tried to increase employment by creating jobs directly. It has spent more than 50 trillion won a year on job-related budgets, expanded civil service hiring, and created temporary jobs for the elderly. Unfortunately, the government’s attempts to create jobs have not succeeded. Despite pouring an astronomical amount into job budgets, the unemployment rate has instead continued to rise. The youth underemployment rate has exceeded 25.0%, the highest level since 2000.

In addition, under the slogan of “a state responsible for my life,” the government has been expanding various welfare programs. It has also sought to improve citizens’ “quality of life” through direct state intervention. It has lowered out-of-pocket health insurance costs while expanding coverage, greatly increased both the level of unemployment benefits and the number of eligible recipients, and introduced various new allowances. This is the complete opposite of Macron’s approach, which seeks to raise people’s productivity and create a France where people work more without relying on state finances.

Of course, France and Korea face different domestic and external conditions, so it would be unreasonable to make a simple comparison between France’s results and Korea’s. Nevertheless, given the current economic environment of low growth and aging populations, the limitations of our government’s fiscal spending-led growth strategy, pro-labor policies, and welfare policies are clear. France, once called the “sick man of Europe” because of low growth and high unemployment, improved its institutions to create jobs and enhance the capabilities of individual citizens, turning itself into a “harder-working nation.” We need to pay close attention to Macron’s formula.

Eun-kyung Kwak, Director of the Corporate Culture Office, Center for Free Enterprise (CFE)

---

Original title: 동시출발 文-마크롱, '일자리 창출' 극과 극

Author: Eun-kyung Kwak

Date: 2020-03-15

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=22&idx=22478