"Special Employment Insurance Deficit in 2 Years... Sooner Than Government Forecast"

National Assembly Budget Office Analysis Report
Kim Seong-won, People Power Party Lawmaker, "Government Lacks Fiscal Soundness Measures... Only Increasing Burden on Existing Subscribers"

[Sejong=Asia Economy Reporter Son Sun-hee] There is a forecast that the point at which employment insurance for special employment types (SETs) such as insurance planners and private tutors turns into a deficit will come earlier than the government expected. While the government anticipated a deficit starting in 2025, the National Assembly Budget Office (NABO) predicted that the fund will fall into deficit as early as 2023, two years earlier. Considering the current situation where the fund is already struggling with deficits in the trillions of won, concerns are rising that the burden on wage workers and companies will only increase.

According to the report titled “Financial Requirements for Employment Insurance for Special Employment Types” submitted by Kim Sung-won, a member of the National Assembly Environment and Labor Committee from the People Power Party, to the National Assembly Budget Office on the 8th, NABO analyzed that the employment insurance fund for SETs will record a deficit of 100 million won in 2023, which will gradually widen to a loss of 81.3 billion won by 2025. The scope of SETs covers 14 occupational groups currently subject to the Industrial Accident Compensation Insurance Act, with the number of insured persons estimated at 882,000 (based on 2019), considering the exemption rates from employment insurance by occupation. The insurance premium rate was applied at the current rate of 1.6%.

Last December, the government announced the “National Employment Insurance Roadmap,” citing financial projections by the Korea Labor Institute, which forecasted a gradual decline in the fund’s balance leading to a deficit of 17.6 billion won starting in 2025. NABO’s projection shows the deficit starting two years earlier, but both reports agree that employment insurance for SETs will ultimately result in a deficit.

Most of the employment insurance expenditures are for unemployment benefits, which are paid during the job-seeking period of insured unemployed individuals. NABO estimated the number of SET insured persons receiving unemployment benefits by reflecting the ratio of current wage workers who receive such benefits. However, considering that freelancers and other SETs tend to have more flexible entry and exit from the labor market compared to wage workers employed by companies, actual unemployment benefit expenditures may be higher than estimated.

The problem is that if a deficit occurs in employment insurance for SETs, the burden will inevitably be passed on to existing employment insurance subscribers. NABO stated, “Since the accounts for wage workers and SETs are not separated in the employment insurance fund, in case of a deficit, the reserve funds of the combined account are expected to be used.”

Concerned about this, the National Assembly pointed out the need to separate the employment insurance accounts for existing wage workers and SETs as a supplementary opinion when passing this year’s budget last December. The National Assembly instructed the Ministry of Employment and Labor, the competent authority, through the supplementary opinion, stating, “Mandatory enrollment of SETs in employment insurance may cause issues regarding the sustainability and fairness of employment insurance,” and “The necessity of account separation should be reviewed and reported to the National Assembly.” The Ministry of Employment and Labor responded, “This is a matter requiring careful consideration and is still under internal review,” but also expressed a negative stance, noting, “In the case of artists, who are already covered by employment insurance, account separation was not implemented, and there are no such cases in other occupational groups either.”

The employment insurance fund recorded a deficit of around 800 billion won in 2018, followed by a deficit exceeding 2 trillion won in 2019. Even last year, when temporary layoffs and unemployment surged due to COVID-19, the deficit is estimated to be in the trillions of won. The Ministry of Employment and Labor recently warned of a premium increase due to concerns over fund depletion in its work report.

Assemblyman Kim said, “While the government is rushing to implement nationwide employment insurance as if roasting beans over a lightning fire, it is not preparing measures to strengthen fiscal soundness,” and added, “Simply raising the premium rate will only increase the burden on existing subscribers, so account separation should be urgently reviewed from the perspective of fairness.”

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