The power of statistics comes from objectivity – but too often they don’t add up, as South Korean politics goes to show, writes Taehyun Ryu.

Why doesn’t life get better even though the economy continues to grow?

This question is a concern for almost all developing countries that are advocating the trickle-down growth model. The economic model of South Korea’s present government began with the recognition that the export-led growth model, in which exports have led to an increase in investment and income, is no longer valid.

The progressive Moon Jae-in administration, born through the Candlelight Revolution two years ago, has adopted an income-driven growth policy as an alternative. Its most visible aspect is the minimum wage policy, which aims for a virtuous circle of income, consumption, and investment through raising the overall income level of the people.

Public attention has shifted towards this issue, now that economic reports have been released in the wake of the new policy. The opposition and mainstream media have criticised the government policies by citing published data.

However, these numbers may not be as objective as we expect.

The biggest controversy concerns minimum wage policies and a decline in employment. As the minimum wage is projected to increase by 10.9 per cent next year (see Figure 1), employers have criticised the increase for being too high, while at the same time workers complain that the growth rate is lower than expected.

From the government’s point of view, it has just lost the approval of the workers – the main supporters of the regime. At the same time, entrepreneurs are also dissatisfied. This leaves the government in a dilemma.

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Figure 1: Minimum wage increases in South Korea (Source: Ministry of Employment and Labour, South Korea)

The opposition party cited a news article reporting that a housewife, fired as a result of a sudden increase in the minimum wage, died from suicide.[1] The article later turned out to be false, but the damage had already been done. Another intentionally distorted article compares the economic growth rates of the US and Korea – but Korea’s figures use the quarterly growth rate and the US figures the annual growth rate.[2] Through such confusing figures, the newspapers convince people that the government’s policy is going in the wrong direction and the growth rate is plummeting.

In fact, the minimum wage in South Korea is at a moderate level compared to other OECD countries in terms of the real minimum hourly wage (see Figure 2) as well as the minimum wage relative to full-time workers’ median income in 2017 (see Figure 3).

In this light, the government’s policy to increase income levels by lifting the minimum wage is reasonable. It is also plausible that the sudden surge may lead to a decline in employment and adversely affect the economy. However, ‘clickbait’ headlines do not allow people to critically consider these various possibilities.

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Figure 2: Real Minimum Hourly Wage in OECD countries (at USD PPPs, Source: OECD, 2017)

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Figure 3: Minimum Hourly Wage Relative to Full Time Median Income in OECD countries (Source: OECD, 2017)

Another controversy began with the announcement of the National Statistical Office that the number of employees had increased by 5,000 in July compared with the previous year (see Figure 4).

Opposition parties and conservative media claimed that the number of employed workers had increased by more than 100,000 in June compared with the previous year, followed by a rapid decrease in July. They attributed this to a failure of the government policy and demanded the government to revise its economic policy thoroughly.

Is this fair? Can a single employment index, the increase in the number of employees, be an indicator of determining the overall economic policy? Are all of these employment problems due to the seven-months-old minimum wage policy?

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Figure 4: Employed people in South Korea (at Thousand People, Source: National Statistical Office, OECD)

The evidence is weak if you look at the statistics that are the basis of the claims. Employment cannot increase without limit. It is also significantly affected by changes in demographic structure. An annotation of the Statistical Office’s announcement clearly states that a simple time-series comparison reflects these changes – there was no significant change in the employment rate.

Could critics not see this? Or, was it intentionally ignored?

The power of statistics comes from objectivity. It is the responsibility of the media to explain the meaning of the numbers to the general public in a way that is easy to understand while retaining objectivity. Instead, they are being arbitrarily interpreted by a backscratching alliance of press, politicians, and interest groups.

Statistics are the basis for government policy and are an important and credible source for setting policies. On the other hand, they can also back up criticisms of existing policies. So there is always a temptation to manipulate the figures.

The government must listen to the voices of the opposition when pursuing policy. And opposition parties and critics must check to ensure that government policy is implemented in the right direction. But all claims and criticisms must be fair. It is obviously inappropriate to quote an unproven or false report, or intentionally magnify a figure without considering other possibilities. Numbers are innocent. But those who use it may bear hidden intentions.

Taehyun Ryu is a PhD candidate in Economics at Crawford School of Public Policy, Australian National University.

Feature image source: Hans

[1] The original article was deleted and only the controversy on the article remains, unfortunately, the articles linked are written in Korean. (http://news.hankyung.com/article/201808290923i, http://news.hankyung.com/article/201808290890i)

[2] This article is also written in Korean, titled “0.7 per cent growth in the second quarter, a more gloomy perspective” (http://news.chosun.com/site/data/html_dir/2018/07/26/2018072603732.html)

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