Employment Insurance Deficit of 3.2 Trillion Won... "Next Year's Employment Retention Subsidy to Be Halved"

Ministry of Economy and Finance Announces Results of 'In-depth Evaluation of Fiscal Projects'

Exclusion of Mid-sized Companies from 'Youth Tomorrow Employment Incentive' Support Targets, etc.

[Sejong=Asia Economy Reporter Moon Chaeseok] As the employment insurance fund is expected to face a deficit of 3.2 trillion won by the end of this year, the government has decided to reduce the employment retention subsidy to half of this year's level next year to improve the fund's financial soundness.

On the 26th, the Ministry of Economy and Finance announced the results of an in-depth evaluation of financial projects for four business groups, including the employment insurance fund. The evaluation reflected the opinions of private experts heard at the '6th Fiscal Management Strategy Committee' chaired by Deputy Minister Ando-geol on the 19th. The results will be incorporated into next year's budget, and institutional improvement measures will be finalized. Matters related to the employment insurance fund will be reflected in the fund restructuring plan of the 'Employment Insurance Fund Financial Soundness Plan' to be announced by the Ministry of Employment and Labor early next month.

Employment Retention Subsidy Halved Next Year

First, the employment retention subsidy will be drastically cut to about half of this year's level next year. The subsidy is 1.3728 trillion won based on this year's main budget. The Ministry of Economy and Finance explained, "To improve the soundness of the employment insurance fund, we have prepared institutional improvement measures such as expenditure efficiency and rationalization of support targets for projects with temporarily increased spending."

The Ministry stated, "The employment retention subsidy, which temporarily increased significantly during the COVID-19 response, will be reduced to about half of this year's level next year and will be gradually normalized depending on the progress of overcoming COVID-19 and the employment situation. Some employment incentives that have already achieved their support purposes will also be adjusted."

The employment insurance fund balance has continuously worsened from 675.5 billion won in 2017 to -808.2 billion won in 2018, -2.087 trillion won in 2019, and -629.5 billion won in 2020. The deficit worsened in 2019 because the insurance premium rate was raised by 0.3 percentage points from 1.3% to 1.6% to strengthen coverage. Due to the COVID-19 crisis, the balance is expected to deteriorate significantly this year as well, following last year.

Mid-sized Companies Excluded from Youth Tomorrow Savings Program

In the same context, the Ministry of Economy and Finance decided to exclude mid-sized companies from the support targets of the 'Youth Tomorrow Savings Program.' This program allows young people who work at small and medium-sized enterprises (SMEs) to accumulate a certain amount over two years and receive a lump sum with government support.

According to the Ministry of Employment and Labor, the cumulative number of recipients of the Youth Tomorrow Savings Program maturity funds reached 103,683 as of the end of last month, surpassing 100,000 recipients five years after the program started in July 2016.

Since the program has somewhat stabilized and it is difficult to increase subsidies due to the COVID-19 crisis, mid-sized companies have been excluded.

Additionally, the Ministry of Economy and Finance plans to redirect the savings from the employment insurance fund to support job transition subsidies for workers affected by industrial restructuring in coal power, automobile, and other sectors. The Ministry explained, "The saved funds will be converted to labor transition support such as job retraining and job transition support in response to industrial restructuring toward low carbon and digitalization, as well as vocational training for innovative talents in future promising fields such as digital sectors."

Reorganization of Low-Performance Policy Funds in Education and Land, Infrastructure, and Transport Innovation

Low-performing policy funds will be reorganized, and clear standards and principles for financial support will be established. The education and land, infrastructure, and transport innovation accounts will reduce or freeze government support, cutting about 10%. These are funds with low private investment matching ratios among the mother funds.

Conversely, mother fund accounts such as the mid-sized fund and innovation venture fund, which have high market response, will see reduced government support.

The Ministry of Economy and Finance explained, "The saved funds will be redirected to regional balanced New Deal funds and investments in innovative companies fostering new industries. When budgeting for policy funds, the recovery funds from existing funds will be prioritized, and any shortfall will be supplemented by government finances to improve the efficiency of investment resource management."

Furthermore, regarding inter-ministerial platform construction projects, the Ministry plans to promote linkage and integration between platforms to prevent duplicate investments. Also, the national subsidy rate for crop disaster insurance for four types of fruit trees will be lowered from 38% in 2021 to 33% in 2023.

Review of the Second Phase of 'Fisheries New Deal 300' Project in the Second Half of the Year

A new in-depth evaluation task for fiscal projects in the second half of the year was also selected. The Ministry of Oceans and Fisheries' 'Fisheries New Deal 300,' scheduled to end next year, will undergo thorough performance analysis before reviewing whether to proceed with the second phase and the implementation method.

Fisheries New Deal 300 has currently selected 250 out of 300 target fishing villages. The remaining 50 fishing villages will be supported next year. This project aims to improve the quality of social overhead capital (SOC) in underdeveloped fishing villages.

Additionally, about 90 'startup support projects' promoted by 16 ministries including the Ministry of SMEs and Startups and the Ministry of Science and ICT will be streamlined by improving low-performance projects and adjusting overlapping projects among ministries.

Efficient role-sharing plans will also be reviewed for overlapping policies such as official residence construction and principal or interest support for private housing leases under 'military officer housing support.'

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