Countdown to Announcement of Employment Insurance Stabilization Measures... Support Fund Maintenance Cut by Half

Ministry of Economy and Finance Announces Results of 'In-depth Evaluation of Fiscal Projects'
Ministry of Employment and Labor Releases 'Fiscal Soundness Plan' Immediately After Next Year's Budget Announcement

Information regarding domestic flights to Jeju from Gimpo Airport Domestic Terminal, Gangseo-gu, Seoul. Photo by Moon Honam munonam@

[Sejong=Asia Economy Reporter Moon Chaeseok] As the employment insurance fund is expected to face a deficit of 3.2 trillion won this year, the government announced that it will cut next year's Employment Retention Subsidy to half of this year's amount ahead of the announcement of the fiscal soundness plan. This is a policy direction presented before the Ministry of Employment and Labor's announcement of the 'Employment Fund Fiscal Soundness Plan' scheduled for early next month.

The Ministry of Economy and Finance announced the results of the 'In-depth Evaluation of Fiscal Projects' on the 26th. The evaluation covered four project groups including the employment fund, and the Employment Retention Subsidy-related content drew particular attention because the subsidy scale greatly affects the fiscal soundness management of the employment fund. The evaluation results are expected to have a significant impact not only on next year's budget but also on future institutional improvements such as the fund's fiscal soundness plan to be announced by the Ministry of Employment and Labor early next month.

The government decided to drastically reduce next year's Employment Retention Subsidy to about half of this year's level. The subsidy amount is 1.3728 trillion won based on this year's main budget. This is to reduce the scale of temporary support projects related to COVID-19 in order to manage the fiscal soundness of the employment fund and continue the expansionary fiscal policy stance. The Ministry of Economy and Finance stated, "The Employment Retention Subsidy, which temporarily increased significantly during the COVID-19 response process, will be reduced to about half of this year's level next year and will be gradually normalized depending on the trend of overcoming COVID-19 and the employment situation. Some employment incentives that have achieved their support purposes will also be subject to adjustment."

The employment fund's 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 despite the insurance premium rate being raised by 0.3 percentage points from 1.3% to 1.6% to strengthen coverage. Due to the COVID-19 crisis, the fund balance is expected to deteriorate significantly this year as well, following last year.

Additionally, the government decided to exclude mid-sized enterprises from the support targets of the 'Youth Tomorrow Savings Program.' This program allows young people employed at small and medium-sized enterprises to accumulate a certain amount over two years and secure 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 enterprises were decided to be excluded.

The government plans to redirect the fiscal savings from the employment fund to support job transition subsidies for workers affected by industrial restructuring in sectors such as coal power and automobiles. The Ministry of Economy and Finance explained, "The savings will be converted to support labor transition such as job conversion and job transition support in response to industrial restructuring like low-carbon and digitalization, as well as vocational training for innovative talents in promising future fields such as the digital sector."

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