During the 4th Wave of COVID-19... Unemployment Benefits in the First Half Already a Record High of 6.5 Trillion Won

6.48 Trillion Won Invested in First Half... Largest Ever Even Since 2019 Job-Seeker Benefits Strengthening
Last Year’s 5.53 Trillion Won Record Broken... Total Budget 11.35 Trillion Won Suggests Exhaustion Before November
About 1 Million Special-Type Workers Soon Counted... Fiscal Stabilization Plan Reflected in Next Year’s Budget to Be Announced in August

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] It has been revealed that South Korea's unemployment benefit payments in the first half of the year surged to a record high of 6.48 trillion won. The amount paid in unemployment benefits has exceeded 1 trillion won for five consecutive months and shows little sign of decreasing. In this situation, starting this month, employment insurance will be applied to workers in 12 special employment types (teukso goyongjik, or teukgo), and with an estimated 1 million people in these categories being officially counted in statistics from next month onward, the amount of unemployment benefits received is expected to increase further.

According to the 'Labor Market Trends Based on Employment Administration Statistics' released by the Ministry of Employment and Labor on the 12th, the amount of unemployment benefits paid last month was 1.0944 trillion won, a 412.8 billion won (60.6%) increase compared to the same month last year. Expanding the scope to the first half of the year, 6.4844 trillion won was paid, averaging 1.0807 trillion won per month. This is the highest ever since the government strengthened coverage by increasing the duration and amount of unemployment benefits in 2019. It is a 17.2% (950.9 billion won) increase from 5.5335 trillion won in the first half of last year. The government’s budget for unemployment benefits this year is 11.3486 trillion won. Already, 57.1% of the budget has been spent, and at the current pace, the entire budget will be exhausted before November.

The problem is that the source of unemployment benefits is the Employment Insurance Fund. The government pays this to support job-seeking activities of the unemployed. This year, the Employment Insurance Fund is also being used for the Youth Employment Special Incentive, a wage subsidy policy providing up to 9 million won per person. The Employment Insurance Fund has been running a deficit since 2018. The government has had no choice but to borrow from the Public Fund Management Fund at an annual interest rate of around 1%, and the debt (deposits) has reached 8 trillion won. The Public Fund Management Fund is a fund established by the government to support public funds such as pension funds.

The Ministry of Employment and Labor initially expected the number of subscribers and benefit payments to decrease in the second half of the year, but changed its stance, saying it would be difficult due to the fourth wave of COVID-19. Kim Youngjoong, Director of Employment Policy at the Ministry, said, "I mentioned that new applicants are decreasing and that there could be a significant drop in the second half, but the variable of the fourth wave has made the situation quite uncertain. If there is a significant increase in new unemployment benefit applicants, we are preparing to provide financial support accordingly, and even if the budget is insufficient, unemployment benefits will be paid through various methods such as revising the fund plan."

For this reason, attention is focused on the 'Employment Insurance Fund Financial Soundness Plan' that Minister of Employment and Labor Ahn Kyung-duk said would be announced 'next month.' The reason the plan is scheduled for 'late August' is because the Ministry of Economy and Finance plans to submit the next year's budget proposal to the National Assembly on September 2. They intend to use the latest data for next year's budget and coordinate with related ministries before announcing the financial soundness plan.

In particular, from this month, about 1 million special employment workers in 12 occupations such as delivery drivers and insurance planners will be included as employment insurance subscribers and become eligible for unemployment benefits, accelerating the depletion of the fund. According to the Ministry of Employment and Labor, although exact data is not yet available, among the 14 special employment types including substitute drivers and quick service (including riders) who will be eligible for employment insurance from January next year, the number of people registered with the Korea Workers' Compensation and Welfare Service for industrial accident employment is estimated to be between 670,000 and 690,000. The number of workers in the 12 occupations who started receiving employment insurance services from the 1st of this month is estimated to be about 1 million. Even conservatively, more than 670,000 people will simultaneously become employment insurance subscribers. This is why concerns persist about a scenario of 'Employment Insurance Fund financial deterioration → Employment insurance premium increase.'

Last month, the number of employment insurance subscribers was 14.333 million, an increase of 462,000 (3.3%) compared to the same month last year. However, the number of subscribers in their 30s, regarded as a growth engine of the Korean economy, was 3.341 million, a decrease of 9,000 (0.3%) compared to the same month last year. The number of employment insurance subscribers in their 30s has been negative for 21 consecutive months. By industry, employment insurance subscribers in the face-to-face service sector, which was hit hard by COVID-19, such as accommodation and food services, decreased by 15,000 (2.3%), while those in public administration, a government job project sector, increased by 46,000 (11.7%).

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