Analysis of Employment Safety-Net Programs in South Korea
Published on 13 August 2019
Published by Social Administrative Program Evaluation Division of the Budget Analysis Department
Korea’s unemployment rate has recently exhibited a continuously increasing trend (3.1% in 2013 → 3.8% in 2018). Although the number of subscribers to the employment insurance scheme continues to increase, around 21.8% of eligible candidates have not subscribed to employment insurance as of 2018. Korea has a higher rate of non-regular workers than the OECD average but their rate of subscription to the employment insurance scheme is only half that of regular workers. In this respect, income stability should be enhanced while supporting job seekers by expanding and strengthening employment safety-nets to cope with the risk of job loss.
As of 2019, there are 45 projects under 13 Ministries that are aimed at helping job seekers to find jobs or provide temporary financial assistance with a budget of 12 trillion 473.8 billion won, having increased by 11.8% on average annually over the past five years (2015-2019). In this report, employment safety-net programs are classified into projects and programs that contribute to expanding the coverage of employment insurance, employment services and job training as well as the Direct Employment Program. Each program is analyzed based on the appropriateness of planning, the efficiency of financial management and implementation as well as effectiveness of outcomes. The following is a summary of the research findings.
First, in order to increase the number of new subscribers to the employment insurance scheme, the government must identify the subscription status of employment insurance, strategically determine the beneficiaries of the programs and seek ways to promote subscription by the self-employed to unemployment insurance.
Second, the reserve ratio of the employment insurance fund’s unemployment allowance account in 2018 reached x0.7, lower than the statutory reserve ratio (x1.5 to x2.0). However, considering the related factors leading to increased expenditures such as expansion of employment insurance coverage and the extension on the maximum duration, it is necessary to develop measures to manage the reserve ratio at an appropriate level.
Third, incentives provided via methods such as employment support and monitoring must be reinforced to prevent reliance on insurance allowances. Also, since there have been some cases in which recipients of the jobseeker’s allowance are re-employed by their previous employer, measures should be developed to address such issues by analysing their causes and strengthening the monitoring system. Furthermore, since the re-employment rate of recipients of the jobseeker’s allowance has been steadily decreasing since 2013, measures to strengthen concrete and actionable re-employment support services are necessary, such as by reinforcing employment support during the period of allowance payment and developing tailored support programs for employment mainly for the long-term unemployed.
Fourth, in order to compare and evaluate the quality of employment services between service providers, an evaluation system needs to be developed that encompasses indicators concerning cooperation such as sharing recruitment information as well as the introduction of quality jobs.
Fifth, since industry and employment structures have undergone recent
transformations, it is necessary to manage job training based on analyses of regional and area-specific employment rates and quality of jobs while enhancing the quality of job training, to enable job training to fulfill its role.
Sixth, once the National Job Support Scheme is introduced, a system of employment safety-nets will be established for those who have been laid off or never been employed. Therefore, compatibility and management of participant data between job safety-net systems is necessary to provide effective, necessary and tailor-made services for participants and utilize such services to promote the participants’ willingness to look for work.