Analysis: New South Korean President Lee Jae-mying expected to enact pro-labor bills
June 4 (UPI) -- During May's televised debate ahead of the South Korean presidential election, Democratic Party candidate Lee Jae-myung was asked about the pro-labor "Yellow Envelope Act."
Lee, who was elected as the country's 21st state head Tuesday, replied positively about the bill, which is designed to limit employers' damage claims against workers involved in strikes.
"The Yellow Envelope Act reflects the Supreme Court's verdicts and is aligned with the International Labor Organization standards. Its legislation is something that should be done obviously," he said.
Observers point out that the response amply demonstrates what may lie ahead for Asia's fourth-largest economy under Lee's leadership during the next five years.
"President Lee is likely to immediately pursue labor-friendly legislation like the Yellow Envelope Act. In fact, the National Assembly will convene Thursday at the request of the Democratic Party," political commentator Choi Soo-young told UPI.
"This means that the Yellow Envelope Act can be passed a day after Lee's inauguration. Under his stewardship, many similar bills are likely to be introduced," he predicted.
The Democratic Party, which holds a majority of seats in the country's unicameral parliament, headed the passage of the Yellow Envelope Act twice in 2023 and 2024.
Back then, however, former President Yoon Suk-yeol vetoed it as the country's major business associations expressed concerns that the bill might embolden already militant trade unions.
Even the American Chamber of Commerce in Korea echoed such a sentiment.
In addition to launching labor-friendly policies, experts expected that the new administration would channel funds in a bid to boost the sluggish economy in the short term.
"The South Korean economy is feared to grow below the potential growth rate this year due to the lack of demand. The new government will try to deal with this through increased public spending," Sogang University economics professor Kim Young-ick said in a phone interview.
"For example, President Lee is projected to proactively implement the local currency system, even if it means incurring a fiscal deficit," Kim said.
President Lee has expressed his commitment to promoting local currencies, or vouchers issued by regional governments that are valid only within designated areas, to revitalize the economy.
The Bank of Korea nearly halved the country's 2025 growth forecast from 1.5% to 0.8% on Thursday, falling short of its potential growth rate estimated to be around 2%.
Over the past three decades, the Korean economy has failed to achieve 1% annual growth only three times: in 1997 amid the Asian financial crisis, in 2009 because of the global financial turmoil, and in 2020 during the virus pandemic.
"As a mid- to longer-term goal, President Lee is projected to jack up the country's growth potential by underpinning productivity. One effective approach would be to fully take advantage of artificial intelligence-powered systems," Kim said.
Lee Phil-sang, an adviser at Aju Research Institute of Corporate Management and former Seoul National University economics professor, worried that President Lee would come up with populist policies at the expense of the country's fiscal health.
"Rather than trying to improve South Korea's economic fundamentals through such measures as deregulation, President Lee is feared to just increase government spending," Lee said.
"Such stimulus policies may have a short-term effect. But it would not make a big difference in the long run. Instead, such an approach may result in a steep rise in public debt. I am concerned that President Lee appears indifferent to rising debt," he said.
During last month's election campaign, President Lee said that the government should not overly worry about sovereign debt.
"There are people saying ignorant things like that the country must never go into debt because the national debt has exceeded $730 billion," he said.
"But if the government doesn't spend money during times like this, then when will it ever?" he asked. "Compared to our annual gross domestic product, the government debt is quite low at less than 50%."
President Lee also has been a prominent advocate of universal basic income, which is designed to provide all citizens with a guaranteed minimum level of income.
During the 2022 election campaign, when former President Yoon defeated then-candidate Lee, the latter proposed an annual payment of around $180 per person with the five-year goal of raising it to $730.
At the time, the idea also faced criticisms of its financial feasibility.
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