Behind the government's decision to revise how unemployment benefits are paid for the first time in 22 years lie structural problems: a fund deficit running into trillions of won and surging spending on measures to address the country's low birth rate. Criticism that the current system blocks early returns to work — including cases where recipients collect more in benefits than they earned while employed — also pushed the overhaul forward. Experts say that because this revision is only a first step toward fiscal stability, further structural improvements are needed, including stronger job placement support and an expanded fiscal role for the state.
The unemployment benefit account of the employment insurance fund posted a deficit of 1.8 trillion won ($1.3 billion) last year, with revenue of 15.7 trillion won against spending of 17.4 trillion won, according to the Ministry of Employment and Labor on the 1st. Reserves stand at 1.8 trillion won on paper, but real reserves fall to minus 6 trillion won once 7.7 trillion won borrowed from the Public Capital Management Fund during the COVID-19 response is factored in. The principal on that borrowing must be repaid in stages starting in 2030, making it urgent to secure fiscal room.
Maternity protection benefits have weighed most heavily on the account. As parental leave and other measures to address the low birth rate expanded, related spending more than doubled to 4.3 trillion won last year from 2.1 trillion won in 2022. That accounted for roughly a quarter of total spending last year. Recipients of parental leave benefits rose 39.1% from a year earlier to 184,000 last year, while male recipients jumped 60.7% to 67,000.
Criticism has also persisted that the benefits themselves do little to promote re-employment. Of the 1.72 million people who received job-seeking benefits last year, 1.091 million, or 63.4%, were paid at the floor amount. A worker earning the minimum wage currently takes home 1.93 million won a month after taxes, but can collect 1.98 million won a month in unemployment benefits after losing that job. Benefits are tax-exempt and are paid for all seven days of the week, including unpaid holidays.
The labor ministry projects annual savings of about 1.4 trillion won if it raises the employment insurance premium rate to 2.0% from 1.8% starting in 2027 and shifts the calculation basis for benefit payments to six days a week, excluding unpaid holidays. The aim is to encourage earlier re-employment by lowering monthly payments while extending the payment period, and to curb spending by drawing on the existing structure under which remaining job-seeking benefits are not paid once a recipient finds work. Applying next year's minimum wage, monthly payments would fall to 1.76 million won at the floor and 1.81 million won at the ceiling, down 220,000 won and 230,000 won respectively from current levels.
The early re-employment allowance will also be revised. The income threshold for disqualification will be lowered to 3 million won a month after re-employment from the current 5.74 million won. About 35,000 people a year are re-employed at monthly pay of 3 million won or more, and once the change takes hold, annual savings of around 180 billion won are expected. The ceiling on job-seeking benefits will be linked to 103% of the floor amount.
The fiscal structure will be reworked as well. A new account, tentatively called the work-family balance account, will be created in 2028 to separate maternity protection spending such as parental leave benefits from the unemployment benefit account. Transfers from the general account will rise 50% to 900 billion won next year from 600 billion won this year. The eligibility standard for employment insurance will also change to monthly pay of 800,000 won or more from the current 60 hours of work a month, narrowing coverage gaps, with plans to eventually extend coverage to those earning business income from personal services.
Friction is expected in the legislative process. Labor groups worry that lower monthly benefits could increase the financial strain on low-wage workers who lose their jobs. Some also note that recipients would have to remain unemployed longer to collect the same total amount, meaning the longer payment period could actually delay returns to work.
Business groups argue that lowering only monthly payments while keeping the total unchanged will not resolve the structural problem. The Korea Enterprises Federation has called for abolishing the floor amount, lengthening the contribution period required to prevent repeat claims, and funding maternity protection benefits entirely from the national treasury. The current overhaul, however, omits measures on repeat claims and has labor, management and the government share the cost of maternity protection.
Kwon Hyuk, a professor at Korea University's Graduate School of Labor Studies, said it is hard to conclude that a modest cut in monthly payments will immediately raise motivation to look for work. "Without strong job placement support attached, it could amount to nothing more than false hope," the professor said. Relying on labor and management alone to bear the cost of the social safety net, including responses to the low birth rate, has its limits, the professor added, stressing that the state must further expand its fiscal responsibility and role to preserve the social solidarity function of employment insurance.
