[Takryucheongron] Expansion of Employment Insurance in a Sustainable Way Is Necessary

Sung Jaemin, Research Fellow at the Korea Labor Institute

Advanced industrial countries all have protection systems for unemployment. However, to prevent moral hazard, the eligibility for benefits is limited to involuntary unemployment, or in cases of voluntary resignation, benefits are granted only when there is a justifiable reason or for long-term unemployed individuals. Unlike wage workers, the self-employed have the characteristic that both starting and closing a business are (voluntary) business decisions, so few countries have made unemployment insurance mandatory for the self-employed.

However, recently, with the rise of platform labor, the number of workers who are considered self-employed but whose actual working methods resemble wage workers?and in some cases must work under commercial contracts to avoid tangible or intangible labor costs for employers?has increased in most countries. Because of this, unemployment protection for self-employed workers with characteristics similar to wage workers has become an international issue.

Countries such as Germany, Italy, and Spain include self-employed workers with characteristics similar to wage workers in unemployment benefit coverage, while Luxembourg and France have expanded mandatory enrollment to all self-employed workers. Denmark, Sweden, and Finland also allow self-employed workers to receive unemployment benefits, but these countries operate a voluntary unemployment benefit system called the 'Ghent system,' so many self-employed workers are known to be unenrolled.

Being eligible for enrollment does not guarantee the same conditions or benefit amounts as wage workers. It is difficult to verify the involuntariness of unemployment for the self-employed, to confirm continuous work as with wage workers, and the income calculation methods are not comparable to those of wage workers. For example, in France, wage worker unemployed individuals receive 57% of their wages for up to 2 to 3 years depending on age, but self-employed unemployed individuals receive about 26 euros per day for only up to 6 months. In Luxembourg, wage workers can receive benefits after working 26 weeks, but self-employed workers must have been enrolled in social security for over 2 years and have been self-employed for more than 6 months to qualify.

A broad enrollment scope does not necessarily mean a good system. Hungary includes self-employed workers in its unemployment benefit system, but the maximum benefit period is only 90 days, making it ineffective. The UK also operates an unemployment benefit system based on earmarked taxes that includes the self-employed, but both the benefit amount and duration are low. Considering these cases, the most desirable direction for expanding employment insurance is to find a balance that provides an appropriate level of protection to unemployed individuals prioritized for protection in each country.

The National Employment Support System, which provides 500,000 won for six months, is a relief program for low-income unemployed individuals and cannot replace employment insurance, which is the primary employment safety net supporting working-age unemployed individuals to prevent them from falling into poverty. Therefore, discussions on expanding employment insurance coverage are important, and the target should be special types of workers (teuksohyeong geunro jongsaja, or 'teukgo') who are urgently discussed overseas. If mandatory enrollment discussions expand to all self-employed workers, it may be difficult to introduce a progressive system that provides an appropriate level of protection due to funding issues and the characteristics of self-employed workers, and it may also hinder the development of systems for wage worker unemployed individuals that still need improvement.

Discussions on mandatory enrollment should be limited to teukgo, while for the broader self-employed population, it is necessary to revise detailed employment insurance programs?originally designed for wage workers?to suit the self-employed, as voluntary enrollment has not expanded. Examples include redesigning parental leave, which can directly lead to business closure risks, to meet the needs of self-employed workers, and establishing detailed items for self-employed tailored employment retention subsidies. Through such gradual processes, it is hoped that employment insurance will respond to labor market changes by expanding coverage while providing protection levels befitting a primary employment safety net.

Sung Jaemin, Research Fellow, Korea Labor Institute

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