The Ministry of Employment and Labor is changing the basis for calculating unemployment benefits from seven days a week to six, the first such revision in 22 years. Monthly payments will fall by 220,000 to 230,000 won, but the payment period will be extended so that total benefits remain unchanged. The employment insurance premium rate will rise to 2.0% next year, with workers and employers each shouldering an additional 0.1 percentage point. The measures are intended to shore up the deteriorating finances of the employment insurance fund. Maternity protection benefits, including parental leave pay, will also be separated from the unemployment benefit account.
Unemployment benefit payouts exceeded 17 trillion won last year, and the employment insurance fund is running a deficit of 6 trillion won excluding borrowings from the Public Capital Management Fund. In effect, the government has been paying unemployment benefits with borrowed money. Restoring fiscal soundness requires not only a higher premium rate but also reform of the spending structure. Yet this revision raises only the premium rate without reducing total payouts, leaving structural spending growth unaddressed. The government says lower monthly payments will encourage re-employment, but that effect is hard to expect given that 65.3% of recipients last year drew benefits for the full eligible period. The structure that ties payouts to the minimum wage also remains intact, with the floor kept at 80% of the minimum wage and the ceiling fixed at 103% of the floor, meaning benefits rise whenever the minimum wage does. Measures to curb repeat claims were left out as well.
The fiscal burden from expanding employment insurance coverage is also considerable. If the eligibility standard shifts from working hours to income, the number of regular workers required to enroll is projected to increase by more than 1.62 million, and daily-hire workers by about 260,000. Bringing vulnerable workers into the social safety net is necessary, but funding measures must be prepared alongside it. If the government also pursues a plan to extend unemployment benefits to those who quit voluntarily, fund spending will swell even faster.
Employment insurance is the last line of defense that allows workers to hold on through recessions and mass layoffs. If the fund is drained by repeat and fraudulent claims and an unreasonable payment structure, it will not be able to play its role when a crisis actually arrives. To keep unemployment benefits from becoming an incentive to delay re-employment, support for early re-employment should be strengthened and job-search requirements enforced more strictly. If the premium rate is raised, the floor should also be lowered to 70% of the minimum wage as originally planned, to strike a balance. Fundamental reform is needed so that unemployment benefits serve their purpose of stabilizing the livelihoods of the jobless and helping them return to the labor market.
