Will Next Year's Job Stability Fund Reach 1 Trillion Won Amid Employment Crisis? "Significant Budget Cuts"

Minister Lee Jae-gap of the Ministry of Employment "Negotiating Budget Cuts"
Opposition Criticizes Business Performance as 'Minimal'... Calls for Reductions
Ongoing Employment Shock from COVID-19... Need for Unemployment Safety Net
UK Implements 'Income Compensation Scheme' Supporting Self-Employed

Lee Jae-gap, Minister of Employment and Labor / Photo by Jin-hyung Kang aymsdream@

[Asia Economy Reporter Kim Bo-kyung] The budget for the Job Stability Fund, which supports labor costs for small and medium-sized enterprises and micro self-employed businesses, is expected to shrink to the 1 trillion won level next year. This is due to the lowest-ever minimum wage increase rate of 1.5% next year, which reduces the burden on business owners. However, concerns have been raised that if the Job Stability Fund program is scaled back amid the ongoing COVID-19 pandemic, it could negatively impact employment retention.

Lee Jae-gap, Minister of Employment and Labor, stated at the Environment and Labor Committee plenary session held on the 21st, "The Job Stability Fund program was originally started as a temporary project, and the recent minimum wage increase rate has been significantly eased," adding, "We are consulting with the budget authorities to significantly reduce the budget for next year." The Job Stability Fund program was introduced in 2018 to alleviate the labor cost burden on business owners caused by rapid minimum wage increases. The minimum wage increase rate was 16.4% in 2018 and 10.9% in 2019, maintaining a high level, but it slowed to 2.9% this year and 1.5% next year. With the labor cost burden from minimum wage hikes greatly reduced compared to previous years, there is justification to downsize the program. Considering that this year's Job Stability Fund budget is 2.16 trillion won, it is highly likely to decrease to the 1 trillion won level next year.

On the same day, opposition lawmakers criticized the low employment effect and overpayment issues of the Job Stability Fund program and argued for budget cuts next year. Park Dae-su, a member of the Future United Party, said, "Nearly 3 trillion won in taxes have been invested annually, but there has been almost no achievement," and criticized, "It is right to terminate the program as soon as possible." According to the '2019 Settlement Review of 100 Major Problem Projects' recently released by the Future United Party Policy Committee, the employment increase effect of the Job Stability Fund program was 0.036 persons per company, showing a minimal employment creation effect relative to budget input. Approximately 2.5 trillion won was spent on the Job Stability Fund program in 2018 and 2.9 trillion won last year. This year's original budget was set at 2.16 trillion won, more than 20% less than last year, but about 500 billion won was added through a supplementary budget in March. As of June this year, 1.58 trillion won (60%) has been executed.

Asia Economy DB=Photo by Hyunmin Kim kimhyun81@

Although the minimum wage increase rate has eased for two consecutive years, attention is focused on whether the Job Stability Fund program will be scaled back due to the variable of COVID-19. This program has served as a support pillar for easing the management burden of business owners of small and medium-sized enterprises with fewer than 30 employees and for maintaining employment of low-wage workers. Last year, 850,000 workplaces and 3.44 million workers benefited from the Job Stability Fund support. Especially as the number of new COVID-19 cases recently approached 400 per day and a second wave is anticipated, a safety net to prepare for employment shocks is urgently needed. According to the Korea Employment Information Service, the number of employed persons in the first half of this year decreased by 59,000 compared to the same period last year, marking the first decline since 2010, when the global financial crisis occurred.

Meanwhile, in the UK, a program to compensate self-employed individuals affected by COVID-19 continues to be implemented. According to the Financial Times, the UK government reintroduced the 'Income Support Scheme' on the 17th, which was previously conducted once in July, to support self-employed people struggling due to COVID-19. It compensates up to 70% of the self-employed person's average monthly income, with applications allowed for up to 6,570 pounds (approximately 10 million won) for a maximum of three months. Eligible applicants are self-employed individuals with an annual income of 50,000 pounds (77 million won) or less who must prove losses due to COVID-19. It is estimated that about half of the 5 million self-employed people will benefit from this program.

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