Ruling party official calls for more fiscal spending to ease income inequality
SEOUL, July 19 (Yonhap) -- The chief policymaker of the ruling Democratic Party (DP) on Thursday raised the need for the government to carry out a more expansionary fiscal policy to ease deepening income inequality.
On Wednesday, the government cut its 2018 outlook for economic growth to 2.9 percent from its earlier projection of 3 percent and unveiled spending plans intended to minimize the fallout of minimum wage hikes and support low-income households.
Kim Tae-nyeon, the head of the party's policy committee, defended the government's move in the face of criticism that it seeks to spend too much taxpayer money in a way that might hamper fiscal soundness.
"It is not a waste of taxpayers' money when the government supports job creation and incomes for low-income families," Kim said at a policy meeting with party members.
He cited data by the Organization for Economic Cooperation and Development (OECD) indicating that South Korea's fiscal spending has only a meager effect toward easing income inequality.
"To resolve the severe income disparity, (the government) should carry out a more active fiscal policy," Kim added. "When fiscal spending is effectively made, it will definitely have an impact on boosting the economy."
Last week, a government-mandated council decided to raise the minimum wage by 10.9 percent to 8,350 won (US$7.40) per hour next year after a 16.4 percent rise this year.
The government said it will sharply increase tax refunds for low-income households and increase the range of beneficiaries to cope with possible side effects of minimum wage hikes. It will also expand the basic pension program and the scope of eligibility for unemployment insurance.
Source: Yonhap News Agency