Income Decreased... But Health and Employment Insurance Premiums Increased

Statistics Korea Q2 Microdata Analysis
Top 40% Income Group Social Insurance Premiums 271,000 KRW... Up 7.97% YoY
Income Slightly Decreased to 7,219,000 KRW
Employment Insurance Rate Hike Policy to Increase Burden Further Next Year

[Sejong=Asia Economy Reporter Moon Chaeseok] While household income has decreased, the burden of social insurance premiums such as health insurance and employment insurance has rather increased. As the government plans to raise the employment insurance rate starting July next year following the health insurance premium hike, the burden of social insurance expenditures is expected to grow further.

According to an analysis by Asia Economy on June 2 of the microdata from Statistics Korea's '2nd Quarter Household Trends Survey,' the social insurance premiums for the top 40% income group (4th and 5th quintiles) in the 2nd quarter of this year averaged 271,000 KRW per month, up 7.97% from 251,000 KRW in the same period last year. Statistics Korea classifies health insurance and employment insurance premiums together as social insurance expenditure items. Before the employment insurance rate increase in the 2nd quarter of 2019, the expenditure was 245,000 KRW.

However, income rose from an average of 7.08 million KRW per month in 2019 to 7.233 million KRW last year, then decreased to 7.219 million KRW in the 2nd quarter of this year. Accordingly, the proportion of social insurance premiums in income increased from 3.46% in the 2nd quarter of 2019 to 3.47% last year and 3.75% this year.

The lower 60% income group (1st, 2nd, and 3rd quintiles) shows a similar trend. Their income in the 2nd quarter of this year was 2.315 million KRW, about 50,000 KRW less than last year, but social insurance premiums increased from 70,000 KRW to 78,000 KRW during the same period. The expenditure ratio jumped from 2.95% to 3.37%.

This means that while the government is already pouring in budget funds, the individual burden has also increased accordingly. According to the National Assembly Budget Office, compared to 2017, the first year of the Moon Jae-in administration, national subsidies for employment insurance and health insurance increased by 821.8% and 34.9%, respectively, last year. As of last year, 1.3569 trillion KRW in taxes were invested in employment insurance and 9.7391 trillion KRW in health insurance. The employment insurance rate rose from 1.3% in October 2019 to 1.6%, and will jump from 1.6% to 1.8% in July next year. The health insurance rate for workplace subscribers will increase to 6.99% of monthly salary next year. During the Moon administration from 2017 to 2021, the rate consistently increased by 2-3% annually. A workplace subscriber with a monthly salary of 3 million KRW will have to pay an additional 3,000 KRW for employment insurance and 3,900 KRW for health insurance each month starting July next year.

Professor Ahn Changnam of the Taxation Department at Gangnam University diagnosed, "Due to the strengthening of social insurance coverage, the so-called 'glass wallet' workers face increased tax burdens, while the benefits they receive are relatively less."

[Image source=Yonhap News]

Social insurance expenditures by citizens are expected to increase further. Regarding employment insurance, starting January next year, the nationwide employment insurance policy will include substitute drivers and quick service workers (including delivery drivers), significantly increasing beneficiaries. At the end of last year, the government announced the 'Nationwide Employment Insurance Roadmap,' estimating that 1.66 million special employment workers (SEWs), with up to 1.33 million of them covered by industrial accident insurance, would be added as employment insurance subscribers. This rate hike has covered 3 trillion KRW of the 3.2 trillion KRW deficit as of this year, and about 1 million more subscribers will be added going forward. According to the July labor market trends data from the Ministry of Employment and Labor, employment insurance subscribers numbered 14.393 million, an increase of 1.56 million (12.2%) compared to July 2017. The number of new subscribers starting next year will be comparable to the increase over the past four years.

Professor Park Kibaek of the Taxation Department at the University of Seoul said, "The basic principle of insurance is that those who pay more premiums should receive higher coverage. However, since employment insurance funds are used for wage support for SEWs and vulnerable groups, there is a possibility of increased taxpayer resistance to the premium rate hike."

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