680,000 Temporary Leave Workers Due to COVID-19, What If They Become Unemployed... Employment Market 'Time Bomb'

Minister of Employment Holds 'Employment Crisis Response Team' Meeting with Related Ministries on the 4th
"Temporary leave workers likely to rapidly shift to unemployed or inactive population"
Delayed reinstatement leads to reduced new hires and income deterioration... Economic downturn 'vicious cycle'
Employment retention support fund hits record high... General industry support capacity exhausted

Minister Lee Jae-gap of the Ministry of Employment and Labor is speaking at the 10th Employment Crisis Response Team meeting held on the 4th at the Seoul Employment and Labor Office in Jung-gu, Seoul. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Bo-kyung] As the job shock caused by the COVID-19 pandemic prolongs, 680,000 "temporarily furloughed workers" have emerged as a potential time bomb in the employment market. If the unpaid leave or furlough period extends and companies reach their limits, these workers may fall into unemployment, increasing the likelihood of large-scale joblessness.

On the morning of the 4th, the government held the 10th Employment Crisis Response Team meeting and the 2nd Korean New Deal Safety Net Strengthening Team meeting at the Seoul Employment and Labor Office, chaired by Lee Jae-gap, Minister of Employment and Labor. Twelve ministries discussed employment outlooks and response strategies together. Recently, with the resurgence of COVID-19 and strengthened social distancing measures, workplace shutdowns have increased and consumer sentiment has weakened, showing signs of worsening job conditions.

Minister Lee said, "In July, the number of temporarily furloughed workers was 680,000, which is 280,000 more than the average over the past two years," and added, "If the economic downturn prolongs, there is a high possibility that temporarily furloughed workers will rapidly convert into unemployed or economically inactive populations." He described the situation as "a grave one where the job shock could become even greater."

A job seeker visiting the Seoul Western Employment Welfare Plus Center in Mapo-gu, Seoul, is filling out an unemployment benefits application form. Photo by Hyunmin Kim kimhyun81@

According to Statistics Korea, the number of temporarily furloughed workers peaked at 1,607,000 in March, the highest ever recorded, then decreased to 685,000 in July. Although the spread of the infectious disease somewhat subsided after May, the figure remains significantly higher than the 400,000 average in 2018-2019.

More than 90% of the increased temporarily furloughed workers occurred in the service sector. In particular, increases were seen in sectors with a high proportion of face-to-face work such as accommodation and food services, education, arts, sports, and leisure. While temporary furloughs have increased during every economic crisis, this time the level is unusually high. During the foreign exchange crisis, corporate bankruptcies led to mass layoffs, producing many unemployed rather than temporarily furloughed workers. However, this time, due to production stoppages caused by the infectious disease, temporary furloughs have increased significantly more than unemployment.

If the economic recovery is delayed due to the resurgence of COVID-19, the return of furloughed workers will be postponed, potentially leading to a large-scale unemployment crisis. If furloughed workers miss the timing to return, companies will reduce or delay new hires, creating a "domino effect" that could further worsen future employment conditions. Additionally, wage reductions due to temporary furloughs can lead to income deterioration and sluggish consumption, forming a vicious cycle of economic recession.

The longer the return of temporarily furloughed workers is delayed, the more employed persons decrease and unemployed persons increase statistically. In Statistics Korea surveys, temporarily furloughed workers are classified as employed because they can return to work immediately once the reason for furlough is resolved. However, if the unpaid furlough period exceeds six months, they are reclassified as unemployed or economically inactive.

The government's capacity to cope with the unemployment crisis among temporarily furloughed workers is also running low. Expenditures on Employment Retention Subsidies, which support wages for workplaces implementing paid leave or furlough instead of layoffs, have been increasing to record monthly highs. The subsidy disbursement was about 60 billion KRW in April, rising to 220 billion KRW in May, 340 billion KRW in June, and 390 billion KRW in July. The special period during which the subsidy rate for general industries is raised to 90% will end at the end of this month.

The Ministry of Employment and Labor previously extended the designation period until the end of March next year for eight special employment support industries, including travel and tourism, and increased the maximum subsidy period from 180 days to 240 days, but difficulties in other sectors such as accommodation and food services remain unresolved.

On this day, the government announced a legislative notice for a partial amendment to the Enforcement Decree of the Employment Insurance Act to ease the eligibility requirements for Employment Retention Subsidies related to unpaid leave and furlough. The current decree provides subsidies only if unpaid leave or furlough lasts 90 days or more; the amendment proposes to provide subsidies for unpaid leave or furlough lasting 30 days or more.

Attention is focused on whether the fourth supplementary budget bill currently under discussion by the ruling party and government will include wage support measures for general industries. Kim Yong-beom, First Vice Minister of Strategy and Finance, said at the "Innovation Growth Strategy Review and Policy Review Meeting" held that day, "We will concentrate policy capabilities to minimize the employment market shock caused by COVID-19," and added, "We will closely monitor employment market conditions and promptly prepare and implement expansion and supplementation measures for existing employment support policies if necessary."

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