Coordination Begins Among Ministries on Second Half Economic Policy Direction... Biggest Challenges Are Jobs and Employment Retention

Considering Corporate Tax Cuts to Maintain Jobs
Possibility of US Program Providing Emergency Loans to SMEs for Wage Use
"Few Companies May Benefit from Tax Incentives... More Proactive Alternatives Needed," Critics Point Out

On the 13th, citizens are waiting to receive consultations for unemployment benefits applications and employment support at the Seoul Employment Welfare Plus Center in Jung-gu, Seoul. Photo by Moon Honam munonam@

[Sejong=Asia Economy reporters Kim Hyunjung and Joo Sangdon] As the government begins coordination among related ministries on the economic policy direction for the second half of this year, the biggest challenge is expected to be the creation of new jobs and the maintenance of employment. Experts emphasize that, given the possibility of the COVID-19 pandemic prolonging into the second half of the year, bold tax support and active assistance for companies maintaining employment are necessary.

According to related ministries on the 18th, Hong Namki, Deputy Prime Minister and Minister of Economy and Finance, held a coordination meeting with economic ministries in the morning and began reviewing the economic policy direction for the second half of the year. The government plans to disclose the final direction in early next month after consultations with the ruling party and government next week. This schedule is more than a month earlier than the usual announcement in early July.

The government is reportedly focusing all efforts on creating new jobs and maintaining employment through this. Detailed measures include providing benefits such as corporate tax reductions for companies that maintain existing jobs by reducing wages through labor-management agreements, and tax credits for workers. After the 2008 global financial crisis, in 2009, the government encouraged 'job sharing' by offering tax benefits to both labor and management through tax reforms. At that time, small and medium enterprises that maintained employment by cutting wages were allowed to recognize half of the wage reduction as a cost, reducing corporate tax, and workers received tax credits on income tax.

The possibility of introducing a U.S.-style Paycheck Protection Program that provides emergency loans to small and medium enterprises maintaining employment is also mentioned. In the U.S., companies with fewer than 500 employees are supported with unsecured loans of up to $10 million over two years, with 75% of the loan amount required to be spent on payroll.

On the 12th, an unemployment benefits briefing session was held for the unemployed at the Seoul Employment Welfare Plus Center in Jung-gu, Seoul. Due to the economic downturn caused by the novel coronavirus disease (COVID-19) crisis, the employment shock has intensified, and the amount of unemployment benefits paid in April reached 993.3 billion won, setting a record high. The number of new job-seeker benefit applicants increased by 32.9% (32,000 people) compared to the same month last year, reaching 129,000./Photo by Kim Hyun-min kimhyun81@

Experts advise that, since large-scale unemployment is likely to lead to a vicious cycle of prolonged economic recession, the government must devote all efforts to establishing institutional support measures through the economic policy direction for the second half of the year. Professor Lee Byunghun of the Department of Sociology at Chung-Ang University said, "The government must recognize that the domestic and international economic labor market situation due to COVID-19 is very severe," adding, "Maintaining employment is the primary task worldwide to prevent a vicious cycle of large-scale unemployment, consumption slump, and prolonged recession." He further stated, "If the COVID-19 situation prolongs, private companies will find it difficult to cover labor costs even with tax reductions or employment retention subsidies. In preparation for this, the business community, government, and labor sector must form a consensus and prioritize social agreement to overcome the crisis."

There are also increasing calls for more comprehensive and proactive alternatives. Professor Ahn Changnam of the Department of Taxation at Gangnam University explained, "Tax reduction benefits should be significantly strengthened for the lower-income class and small business owners, who are estimated to be the most affected by the COVID-19 crisis," adding, "Since the amount of taxes collected from them is not large, the impact on public finances will be limited." Professor Ahn also said, "Because the cost of collecting taxes from the lower-income class and small business owners is similar to the amount collected, increasing exemptions would reduce tax administrative efforts."

Professor Hong Kiyong of the Department of Business Administration at Incheon University pointed out, "The currently discussed employment retention measures have good intentions but are less effective because the amount of tax reductions is not large," adding, "The number of companies that will receive benefits is expected to be small." He added, "No matter how much tax is reduced, labor and personnel costs remain a significant burden," and suggested, "Temporarily lowering the minimum wage, which has become a sacred cow, and compensating the difference through earned income tax credits could be a way to protect domestic workers."

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