Employment Fund Depletion... Ultimately, Insurance Premium Rate Raised from 1.6% to 1.8%

Measures to Stabilize the Financial Health of the Employment Insurance Fund

[Sejong=Asia Economy Reporter Son Seon-hee] The government has decided to raise the employment insurance premium rate from the current 1.6% to 1.8% to restore the financial soundness of the employment insurance fund, which is facing depletion. This will take effect from July 1 next year.

On the 1st, the Ministry of Employment and Labor held an Employment Insurance Committee meeting and approved the "Employment Insurance Fund Financial Soundness Plan" with this content. In addition to raising the unemployment benefit account premium rate by 0.2 percentage points (0.1 percentage points each for workers and employers), the government plans to secure an additional total revenue of 3 trillion won next year by adding government financial support such as a transfer of 1.3 trillion won from the general account.

With the premium rate increase, each labor and management will bear an additional 2,886 won per month and 34,632 won annually per worker. This is calculated based on the average monthly wage of 2.88 million won for workers.

Since the inauguration of the Moon Jae-in administration, the scope of employment insurance coverage has rapidly expanded, and employment expenditures have significantly increased due to increased support funds for various job projects. Excluding the public fund management fund (Public Fund) borrowings of 7.9 trillion won, the employment insurance fund is projected to have a deficit of 3.2 trillion won by the end of this year. According to the Ministry of Employment and Labor's mid- to long-term financial forecast, the fund is expected to be depleted in 2023.

As the fund's financial situation worsened, the government raised the unemployment benefit premium rate from 1.3% to 1.6% in October 2019. However, this was insufficient to cover the increased expenditures, leading to another premium increase after 2 years and 9 months.

The government cites expanded expenditures on employment retention, support for vulnerable groups' employment, and job-seeking benefits during the COVID-19 crisis, as well as youth unemployment and low birthrate issues as causes of financial deterioration. However, there have been continuous criticisms regarding excessive overlapping benefits for job-seeking allowances paid from the unemployment benefit account and issues such as payments for parental leave benefits that do not align with the original purpose. Ultimately, as the fund depletion has made the premium rate increase a reality, criticism follows because the burden falls on the entire nation.

The Ministry of Employment and Labor announced that along with the premium rate increase, it will adjust six temporary projects including the Youth Additional Employment Incentive and Special Employment Promotion Incentive to reduce expenditures by about 1 trillion won next year. Additionally, support levels for projects temporarily increased due to the COVID-19 situation, such as employment retention subsidies and vocational training living expense loans, will be adjusted to cut about 1.6 trillion won next year.

Furthermore, the ministry plans to continue transferring projects that do not align with the fund's purpose to the general account and improve the system by adjusting benefits for repeated recipients of job-seeking allowances.

Park Hwa-jin, Vice Minister of Employment and Labor, said, "This financial soundness plan is the result of focused discussions among the government, labor, and management to overcome the difficult financial situation together by expanding government financial support and having labor and management bear the premiums." He added, "We will continue to strive to ensure that the employment insurance fund fulfills its original role of overcoming employment crises and supporting employment for vulnerable groups."

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