National Employment Insurance... Expected Backlash from Self-Employed Facing Increasing Burdens

Concerns Over Fund Depletion if Incentives Given to Self-Employed
Confusion Over Closure Criteria for Unemployment Benefits

The economic downturn for self-employed individuals continues as external uncertainties and rising oil prices combine as adverse factors. On the 4th, a store in the underground shopping center near Gangnam Station in Seoul hung a notice announcing its closure and operated on its last day. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Jang Sehee] "Sales drop by nearly half during the off-season in January and February. If the government mandates employment insurance premiums, it will be a significant burden."

On the 4th, Jeong Mo (30), who runs a cafe in Yeomchi-eup, Asan-si, Chungnam Province, expressed concerns about the nationwide employment insurance introduction discussions. Although the Blue House has raised the nationwide employment insurance system as a task related to the novel coronavirus disease (COVID-19), there are numerous issues to resolve. In particular, resistance from self-employed individuals who are reluctant to enroll due to premium burdens is expected to be the biggest obstacle.

Currently, there are two types of employment insurance enrollment: mandatory and voluntary. Employees are mandatorily enrolled in employment insurance upon employment. Premiums are shared equally between employers and employees. Self-employed individuals can voluntarily enroll if they wish, but enrollment rates are extremely low due to premium burdens and stringent unemployment benefit payment criteria. In fact, as of December last year, only 0.38% (about 15,000 people) of all self-employed individuals were enrolled in employment insurance.

If the government includes self-employed individuals in the mandatory employment insurance enrollment, immediate backlash from them is expected. To ease this, incentive measures similar to those given during the early stages of the National Pension could be considered, but this raises concerns about fund depletion. Professor Andonghyun of Seoul National University’s Department of Economics said, "Looking at the National Pension alone, it started with mandatory enrollment for workplaces with 10 or more employees during the Roh Tae-woo administration in 1998, gradually expanding the target and creating a structure that collects a lot of money. If the proportion of people receiving unemployment benefits exceeds those paying premiums and the amount of unemployment benefits increases, the fund depletion problem could worsen."

The National Pension began as mandatory for workplaces with 10 or more employees in 1988 and expanded to include urban self-employed individuals in 1999, marking the start of the nationwide pension era.

For self-employed individuals, unemployment benefits can only be received upon business closure, but confusion is expected regarding the "closure criteria." Professor An predicted, "It is not uncommon for there to be few customers, with employees not coming to work, and the owner running the business alone without generating profit. Since cases vary greatly by industry, conflicts between self-employed individuals and employment insurance authorities over closure criteria are likely."

It is also uncertain whether special-type workers (teukgo) and freelancers, whose employment forms are relatively unstable, will meet the criteria for receiving unemployment benefits. The 2020 unemployment benefit eligibility requires an insured period of at least 180 days within the 18 months prior to job separation.

Professor Kim Sangbong of Hansung University’s Department of Economics said, "Employment insurance requires payment for a certain period, but considering that 20% of all self-employed individuals drop out every year, another blind spot will definitely emerge." He added, "Health insurance is mandatory, but employment insurance is optional. There is no country in the world that forces payment of employment insurance premiums."

Meanwhile, the Ministry of Economy and Finance, the fiscal authority, is taking a cautious stance on nationwide employment insurance enrollment. A senior government official said, "Nationwide employment insurance enrollment is an issue that cannot be resolved in a few months," and "We must also consider cases where insured persons do not wish to enroll." He added, "Employment insurance has mandatory enrollment periods and the system design is very complicated. Institutional improvements are needed immediately for those currently in the employment insurance blind spots."

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