The Reality of the COVID-19-Induced Unemployment Crisis... What Are the Drastic Employment Measures?

by Ju Sangdon

Published 15 Apr.2020 10:52(KST)

(Photo for reference)

[Asia Economy Reporter Joo Sang-don] Last month, the increase in the number of employment insurance subscribers halved compared to a year ago, as the service industry jobs were hit hard by the impact of the novel coronavirus infection (COVID-19). The government is struggling to come up with "drastic employment measures." The government is currently reviewing measures focused on inducing "job retention," including further increasing the support ratio for employment retention subsidies, support for blind spots in employment insurance, and expanding government direct jobs.

On the 14th, a government official said, "In the current situation, maintaining jobs is more important than creating new ones," adding, "Job retention is the core of this employment measure."

The background for the government preparing drastic employment measures is that unemployment due to COVID-19 is becoming a reality. In fact, the number of employment insurance subscribers last month was 13.76 million, an increase of only 1.9% (253,000 people) compared to the same month last year. This is a significant slowdown compared to the increase of 526,000 subscribers in March last year. When unemployment rises, income decreases, which can lead to a vicious cycle eventually causing a long-term recession.

President Moon Jae-in also emphasized the day before, "In the economic crisis phase, the government will focus its policy capabilities on protecting jobs," and added, "Considering the welfare costs that must be spent if jobs are lost, this is rather a cost reduction and a productive investment to prepare for the future."

Accordingly, the government is first reviewing measures to increase the employment retention subsidy as a way to maintain current jobs. Earlier, on the 25th of last month, the Ministry of Employment and Labor decided to apply relaxed eligibility requirements and increased subsidy amounts for employers who inevitably need to adjust employment due to business damage caused by COVID-19 until the "national infectious disease crisis alert" is lifted. Currently, the support level of employment retention subsidies is being temporarily increased up to 90% for all industries from April to June. There is a high possibility that this ratio will be raised further.

However, the related enforcement decree work has not yet been completed. First, the enforcement decree work for the 90% expansion and then the revision of the notification must be additionally carried out. A Ministry of Employment and Labor official said, "Since the 90% expansion is already being implemented, the enforcement decree must be revised accordingly," and added, "If the ratio is adjusted upward, the notification must be revised."

Measures for those not enrolled in employment insurance are also urgent. President Moon also ordered, "Please devote great effort to preparing support measures for those not enrolled in employment insurance." In fact, as of February, only 67% (13.8 million) of all wage workers (20.56 million) were enrolled in employment insurance. Thirty-three percent are outside the safety net of employment insurance. Among 470,000 applicants for employment retention subsidies as of the 13th of this month, only 20,000 to 30,000 people have received subsidies, which is less than 10% of the total. The total amount of employment retention subsidies disbursed is only 20 billion won. The Job Support Centers in autonomous districts, which handle consultations and applications for employment retention subsidies, are flooded with calls related to the subsidies all day long. However, many of the callers are freelancers or others who are not eligible for support.

Three main support options are being discussed for those not enrolled in employment insurance: ▲mandatory enrollment of non-subscribers (requires legal amendment), ▲partial government support of amounts equivalent to employment insurance, and ▲direct job support.

Mandatory enrollment of non-subscribers requires legal amendment, but the relevant bill is currently pending in the National Assembly’s Environment and Labor Committee. The government plans to amend the "Partial Amendment to the Employment Insurance Act," which was introduced by Representative Han Jeong-ae of the Democratic Party, when the next National Assembly convenes. A Ministry of Employment and Labor official said, "We expect the National Assembly to convene once after the election," but added, "Since the related bill is currently pending in the standing committee, it may take some time." The bill includes applying employment insurance to special-type workers and artists to ensure their livelihood stability in case of unemployment.

Providing amounts equivalent to employment insurance through the budget also poses a burden due to the huge fiscal demand. Since the second supplementary budget is a one-point supplementary budget for emergency disaster relief funds, this issue was not reflected in the current supplementary budget. A government official said, "If support is provided with money, a third supplementary budget will be inevitable," adding, "Ultimately, the government's fiscal burden will be significant."