Second Disaster Relief Fund to Be Paid to Closed Small Business Owners... Increasing from 1 Million Won to 2 Million Won

Payment without proof of business suspension
One-time payment of 500,000 won to unemployed youth... Criticism of low effectiveness as 'token gesture'

[Asia Economy Reporters Jang Sehee and Wondara] As the ruling party and government appeal the inevitability of selective payment for the second round of emergency disaster relief funds, controversy over blind spots has arisen, gradually expanding the scope and scale of support recipients. Accordingly, even after the government finalizes and announces the second round of emergency disaster relief funds this week, the controversy is unlikely to subside easily. This is because cases may occur where those affected do not receive government support.

According to the ruling party and government on the 8th, they are expected to broadly provide the second round of disaster relief funds to small business owners and self-employed individuals whose sales have decreased due to the novel coronavirus infection (COVID-19). Initially, the government planned to provide disaster relief funds mainly to small business owners and self-employed individuals affected by assembly bans and business restrictions, but as controversy over blind spots arose, the target and scale have gradually expanded.

◆Lowered Threshold for the Second Disaster Relief Fund= Notably, the ruling party and government have decided to include small business owners who have closed due to COVID-19 in the support target. A Democratic Party Policy Committee official said, "We have decided to support small business owners who have closed due to COVID-19," adding, "The support target will be small business owners who closed after the outbreak of COVID-19, and detailed matters such as the timing of closure and support amount will be finalized at the emergency economic meeting on the 10th." For high-risk facilities such as karaoke rooms, buffets, and PC rooms, where operations were suspended due to social distancing, the second disaster relief fund of up to 2 million KRW will be provided without requiring proof of sales decline such as card sales performance. Initially, the government planned a scale of 1 million KRW plus alpha, but after complaints that "the scale is too small," they decided to expand the support scale.

The selection criteria are also expected to be significantly lowered. Kim Sang-jo, Chief Presidential Secretary for Policy, appeared on a radio broadcast that day and said, "We are trying to build a system that selects targets and quickly pays them through administrative data and delivery systems that the government already has, in a way that does not require individuals to prove their income as much as possible," adding, "For those with sales below a certain amount based on last year's sales, we are basically planning to provide support without prior screening or with minimal verification."

In this regard, a Democratic Party Policy Committee official also said, "For high-risk facilities that have suspended operations, support will be provided uniformly regardless of card sales performance." Self-employed individuals who are not high-risk facilities such as general restaurants are also expected to receive support of about 1 million KRW. However, some industries such as entertainment and nightclubs are excluded from benefits, raising concerns about large-scale opposition by industry. As the target and scale of the Small Business Hope Fund increase compared to the original plan, its share in the supplementary budget (추경) is also expected to grow.

◆50 Million KRW Each to Unemployed Youth= The government has decided to provide a one-time payment of 500,000 KRW to unemployed youth. However, there are criticisms that the actual policy effect is low and that it is merely a formality for "youth budget allocation." A key ruling party and government official said, "We plan to provide a one-time payment of 500,000 KRW to youth who face difficulties in job seeking," adding, "Since we cannot give it to all youth aged 18 to 34, it will be given to youth with household income below 120% of the median income (5,699,000 KRW per month for a four-person household)."

It is estimated that about 100,000 unemployed youth from households below 120% of the median income will be eligible. Providing 500,000 KRW each to them is expected to require about 50 billion KRW in funding.

The problem is that those receiving the Youth Job-Seeking Activity Support Fund can also receive the second disaster relief fund (Youth Job-Seeking Activity Fund) simultaneously. The current Youth Job-Seeking Activity Support Fund, implemented by the government, provides 500,000 KRW per month for six months to unemployed youth aged 18 to 34 who graduated or dropped out within two years and whose household income is below 120% of the median income. Youth already receiving the Youth Job-Seeking Activity Support Fund will effectively receive one additional month of support.

Some argue that one-time cash payments have low linkage to job-seeking activities and may be used simply as living expenses.

Professor Yang Jun-mo of Yonsei University’s Department of Economics pointed out, "If one-time cash support is given based on income without distinguishing whether the person was idle or resting, it will ultimately increase the tax burden," adding, "One-time cash payments may prolong unemployment and increase the unemployment rate as a side effect." Professor Sung Tae-yoon of Yonsei University’s Department of Economics also said, "Youth job-seeking support should be linked to education and training," adding, "Only then is there a possibility of effectiveness without excessive fiscal spending."

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