[Weekly Review] COVID-19 Employment Freeze Becomes Reality... Real Estate and Financial Asset Holders Excluded from Disaster Relief Funds

[Asia Economy Reporter Kim Eun-byeol] Due to the impact of the novel coronavirus infection (COVID-19), the number of employed people last month shrank for the first time in over 10 years, marking the largest decline since the global financial crisis. Temporary layoffs reached the highest level for the same month since statistics began in 1983, indicating that the employment shock is intensifying as the COVID-19 situation prolongs. The government decided to exclude high-net-worth individuals owning apartments valued at around 2 to 2.2 billion KRW or deposits of about 1.25 billion KRW from the emergency disaster relief fund payment targets. Self-employed individuals whose income has recently plummeted due to COVID-19 can receive support based on supporting documents. The International Monetary Fund (IMF) forecasted that South Korea's growth rate this year will be -1.2%, indicating negative growth.

On the 10th, unemployment benefit applicants are entering the Western Employment Welfare Plus Center in Mapo-gu, Seoul. Photo by Mo Nam Moon munonam@

◆ COVID-19 Employment Freeze Becomes Reality = According to the 'March Employment Trends' announced by Statistics Korea on the 17th, the number of employed people last month was 26,609,000, a decrease of 195,000 (-0.7%) compared to a year earlier. This is the largest decline in 10 years and 10 months since May 2009, when employment decreased by 240,000 during the global financial crisis.

By industry, sectors with high face-to-face contact such as wholesale and retail trade (-168,000; -4.6%), accommodation and food services (-109,000; -4.9%), and education services (-100,000; -5.4%) saw declines. The number of employed people in the service sector decreased by 294,000, marking the largest drop in 21 years and 6 months since September 1998 (-308,000). The number of manufacturing workers decreased by 23,000 (-0.5%) compared to the previous year, returning to a downward trend after three months. Manufacturing employment had been declining for 21 months from April 2018 but rebounded in January after 1 year and 10 months.

Eun Soon-hyun, Director of the Social Statistics Bureau at Statistics Korea, explained, "The impact of COVID-19 appeared mainly in industries involving face-to-face contact," adding, "Industries such as wholesale and retail trade, accommodation and food services, and education services were directly and indirectly affected."

By age group, those aged 60 and over increased by 336,000 compared to a year ago, with 198,000 of them being 65 or older. Employment decreased in all other age groups except those in their 60s: 20s (-176,000), 30s (-108,000), 40s (-120,000), and 50s (-75,000).

Temporary layoffs reached 1,607,000, an increase of 1,260,000 (363.4%) from a year earlier. This is the highest level for the same month since statistics began in 1983. Temporary layoffs are counted as employed if the unpaid leave is expected to end and the unpaid period does not exceed six months. If the return is uncertain and the unpaid period exceeds six months, they are counted as economically inactive, but since the return is certain, they are classified as temporarily laid off.

[Image source=Yonhap News]

◆ Real Estate and Financial Asset Holders Excluded from Disaster Relief Fund = Immediately after the April 15 general election, detailed criteria for selecting disaster relief fund recipients were announced. On the 16th, the government held a joint briefing with related ministries to announce the detailed criteria prepared by the 'Emergency Disaster Relief Fund Pan-Government Task Force.'

Even if households qualify as the 'bottom 70% income bracket' based on March health insurance premiums, high-net-worth individuals are ultimately excluded from receiving the fund if their combined property tax base exceeds 900 million KRW or their comprehensive income tax taxable financial income exceeds 20 million KRW.

First, the support fund will be paid up to 1 million KRW (for households of four or more) to households whose combined health insurance premiums for March this year fall within the bottom 70%. For a household of four, the premiums are 237,652 KRW for workplace subscribers, 254,909 KRW for regional subscribers, and 242,715 KRW for mixed subscribers. The emergency disaster relief fund can be received in addition to previously announced low-income consumption coupons worth 1.4 million KRW, senior job coupons (236,000 KRW), and special care coupons (400,000 KRW per person). Accordingly, a household of four receiving basic livelihood security can benefit from cash support totaling up to 3.84 million KRW.

The cut-off criteria for high-net-worth individuals use taxable base data, setting the threshold at 900 million KRW, which is the deduction standard for a single homeowner under the comprehensive real estate tax. This corresponds to households owning homes with an official appraisal price of about 1.5 billion KRW or market prices around 2 to 2.2 billion KRW. The financial income criterion is set at 20 million KRW, which is the threshold distinguishing comprehensive and separate taxation on interest and dividend income. This corresponds to income generated from deposits of about 1.25 billion KRW (assuming a 3-year fixed deposit in 2018 with an annual interest rate of 1.6%).

The government also plans to include self-employed individuals whose income reduction is not yet reflected in current health insurance premiums by adding premiums based on supporting documents and including them if they meet the selection criteria. Self-employed individuals can submit bank statements showing sales deposited from card companies in February and March this year or sales confirmed by sales management systems (POS). Freelancers or special-type workers such as private tutors can submit service contracts, appointment documents, or certificates confirming no labor provision. However, even in these cases, high-net-worth individuals are excluded from support.

However, this government policy must go through National Assembly review and approval, as well as local government screening, so the actual payment timing cannot be specified yet. Whether the post-election National Assembly will pursue 'universal payment' is also a variable.

[Image source=Yonhap News]

◆ IMF Projects G20 Growth Rate at -2.8% This Year... South Korea at -1.2% = Meanwhile, negative global growth due to COVID-19 is becoming certain. The International Monetary Fund (IMF) forecasted that the economic growth rate of the Group of Twenty (G20), including South Korea, will be -2.8% this year due to the COVID-19 pandemic.

In the 'G20 Surveillance Note' released on the 16th (local time), the IMF lowered the GDP growth forecast for G20 countries by 6.2 percentage points from January to -2.8%.

When divided by economic regions, the growth rate for advanced countries including South Korea, the United States, Canada, Japan, Australia, Germany, the United Kingdom, France, and Italy was projected at -6.0%, down 7.6 percentage points from the January forecast. Growth of 4.5% is expected next year.

South Korea is expected to have a negative growth rate of -1.2%, ranking fourth after these countries in terms of growth rate.

South Korea's growth rate decline of 3.4 percentage points from the January forecast was the smallest among G20 countries. The government positively evaluated this IMF economic outlook, stating, "Reflecting swift initial quarantine efforts and bold economic response efforts, the decline in South Korea's growth forecast this year is relatively small compared to major countries."

This content was produced with the assistance of AI translation services.