Tax benefits that large South Korean companies receive when hiring young workers and other new employees will disappear starting next year. The government is excluding large companies from an integrated tax credit program that reduces corporate and income taxes based on the number of jobs added. According to reporting by Seoul Economic Daily, the government has decided to limit next year's employment-boosting tax support to mid-sized and small businesses. Currently, large companies that hire preferred categories of workers, including young people aged 34 and under, receive credits of 3 million won per employee in the first year and 5 million won in the second year. In place of the tax benefits for large companies, the government plans to expand fiscal support for large companies outside the Seoul metropolitan area and for small and mid-sized firms.
The policy rationale is understandable: conserve limited resources and channel them into regions outside the capital area and into mid-sized and small businesses. But with the jobs young people want concentrated overwhelmingly at large companies, removing the hiring incentive raises serious concerns that the supply of quality jobs will shrink. What is more, of the 4.6 trillion won in corporate employment tax support this year, benefits going to large companies account for only about 1.5% of the total, meaning the savings will be negligible. The youth job market is already on a seemingly bottomless decline. A survey by the job platform Incruit found that while the number of companies hiring in the second half of this year will rise, total hiring volume is projected to fall from last year. Against that backdrop, losing the tax benefits as well could further reduce new hiring at large companies.
At a youth budget event last month, President Lee Jae-myung said the government must examine and correct whether its policies have been designed for the convenience of the government as the supplier. Given that he called for unemployment measures to be drawn up from the perspective of those who use the policies, it is questionable whether this decision matches what young people are looking for. Above all, the government must first address the fundamental reasons companies are reluctant to hire. In a labor market as rigid as the current one, quality jobs for young people will inevitably remain limited. Because expanding fiscal support has its limits in creating quality jobs, structural reform to resolve the labor market's dual structure must come first. On extending the retirement age, which could raise labor costs and hold back youth hiring, a reasonable solution must also be found to balance jobs across generations.
