South Korea’s ruling conservative party will avoid further tax cuts for companies and individuals and increase financial support for the poor instead, its newly appointed leader said Monday. The Grand National Party suffered heavy defeats in local elections last month and is moving to the center in an attempt to regain support ahead of next year’s presidential vote.
Hwang Woo-yea, who was elected GNP leader last week, announced more than $9 billion in additional education, child support and housing spending at the expense of tax breaks championed by President Lee Myung-bak.
The former construction executive rose to power two years ago on an unapologetically pro-business platform and shepherded South Korea through the global recession with an openness to international trade and enhanced research and development investment.
Last month’s electoral defeats dealt a blow to Lee’s economic policy however and threw the GNP leadership in disarray. The party stands to lose its parliamentary majority in elections next April.
The president reshuffled his cabinet Friday, replacing his long-serving finance minister with the labor secretary who said he will work to make sure that the benefits of economic growth are felt by everyone. Lee’s approval rating has plummeted to an unprecedented 30 percent low while the opposition Democratic Party and its likely presidential candidate are evermore popular.
Since South Korea emerged from military dictatorship in the 1980s, successive democratic governments attempted to strengthen workers’ rights, hurting flexibility and productivity in one of East Asia’s most prosperous nations. Rather than be burdened with an older workforce, many South Korean companies impose a low mandatory retirement age, which leaves many without full-time employment in their early fifties.
That very constituency remains adamantly opposed to authoritarianism because it lived through the democratization of the 1980s. Many therefore expect it to defy the usual trend of voters becoming more conservative as they grow older.
President Lee, who ended ten years of progressive rule in 2008 with a landslide victory for the GNP, promised to rein in spending and cut through the swathes of regulations; reduce corporate tax rates; privatize powerful public entities and improve conditions for investment.
A study released by the Hankyoreh newspaper last month showed that conglomerate profits had risen 73 percent under Lee’s tenure. South Korea also experienced 10 percent growth in employment and a 1.3 percent increase in workers’ income during the last two years.
At the same time, youth unemployment is high and many educated adolescents are toiling in low paid, part-time jobs while consumer prices are rising, prompting concerns over growing inequality.