"If Unemployment Surges, Regions Will Be Designated as Employment Crisis Areas"... Ministry of Labor Prepares Three-Stage Response to Mitigate Middle East Job Shock

The Ministry of Employment and Labor has decided to implement a three-stage response plan based on various scenarios to mitigate the impact on domestic jobs caused by the Middle East war.

View of the National Industrial Complex in Yeosu, Jeollanam-do. Photo by Yonhap News

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On April 8, the Ministry held the "2nd Emergency Employment and Labor Situation Review Meeting and the 8th Regional Employment Situation Review Meeting," presided over by Vice Minister Kwon Changjun, to assess the impact of the Middle East war on jobs across different regions and industries.

The Ministry has prepared a three-stage response plan to address regional and sector-specific employment crises resulting from the war between the United States and Iran. The plan is designed to be activated immediately depending on the situation.

In the first stage, where disruptions such as work stoppages or production setbacks occur at specific workplaces or in particular industries, the Ministry will respond by strengthening employment and wage arrears monitoring, providing employment retention subsidies, supporting local jobs, and guiding the prevention and resolution of wage arrears.

At the second stage, if the crisis spreads to key industries within a region due to difficulties in securing raw materials, the Ministry will focus on designating affected areas and industries as "preemptive response regions for employment crises" or "special employment support industries." This will be accompanied by support for activating remote and flexible work arrangements in the private sector to manage resources.

If uncertainty persists and the employment crisis expands across all industries, leading to a surge in unemployment and wage arrears in the third stage, the Ministry will designate regional employment crisis areas and strengthen support for employment retention, job transitions, and reemployment. In addition, the government will expand the scale of living cost support and wage arrears settlement loans reflected in the supplementary war budget to better protect vulnerable workers facing unemployment and wage arrears, and will swiftly implement measures to stabilize youth employment.

Vice Minister Kwon stated, "Given the severe situation, with uncertainty in the labor market increasing due to the prolonged Middle East war, the government is preparing to respond immediately to any scenario by keeping all possibilities open and basing our actions on step-by-step response plans." He added, "We will proactively respond before difficulties arise in the field, and if employment shocks become a reality, we will use all available policy tools and take responsibility until the end."

During the meeting, concerns were raised that job losses could first occur in domestic petrochemical and steel sectors, which have a high dependence on Middle Eastern raw materials.

Hong Seonguk, Head of the Industrial Economy Data Analysis Office at the Korea Institute for Industrial Economics and Trade, analyzed that Korea is vulnerable to complex shocks from the Middle East war because its economy is centered on manufacturing industries that rely heavily on imports for most of their crude oil and liquefied natural gas (LNG), and have a high dependency on Middle Eastern raw materials. He suggested that, in addition to diversifying energy sources, the government should take preemptive measures to support small and medium-sized enterprises (SMEs) and mid-sized companies.

The Korea Petrochemical Industry Association predicted that, in the case of petrochemicals, inevitable workforce adjustments such as batch shifts may become necessary if operations are suspended due to disruptions in naphtha supply. The Association emphasized the need for special provisions to prioritize employment retention subsidies, job placement and transition programs, and minimizing the application process for unemployment benefits at worksites undergoing restructuring.

The Korea Iron and Steel Association explained that the prolonged Middle East war could have some impact, such as reductions in employment and primary metal production, particularly in key regions like Pohang and Gwangyang. The Association also noted that, due to the nature of process industries, the impact on employment indicators appears with a time lag, and therefore, it is necessary to proactively establish employment safety nets.

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