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Major hurdles expected before expanding employment insurance
Members of the Korean Confederation of Trade Unions hold a rally in front of the National Assembly, April 13, demanding the government relief measure include workers not subscribed to the state-run Employment Insurance. Korea Times file
By Lee Kyung-min
By Lee Kyung-min
Debate is heating up over whether to expand the state-run employment insurance, an issue brought to the fore after the economic fallout of the COVID-19 pandemic laid bare the vulnerability of low-income earners who are ineligible for unemployment benefits.
Being discussed is whether self-employed people should be included in the system, how many workers should be brought in and who should shoulder the insurance premium.
According to data from the Ministry of Employment and Labor, 13.75 million people are subscribed to the insurance as of March, less than half of the over 27.78 million who make up the working population.
It is mandatory for salaried workers to subscribe to the insurance with a monthly premium ― 1.6 percent of the worker's salary ― shouldered equally by the employer who pays 0.8 percent and the other half paid by the worker.
Unlike salaried workers, those who cannot subscribe to the insurance are called “special contract workers,” in Korea. The term encompasses a diverse range of jobs such as sports instructors, chauffeurs, artists, theater actors, insurance planners, tourism workers and golf caddies.
They can be made eligible to subscribe to the insurance upon passage of a bill that has been pending at the National Assembly since 2019. The bill seeks to change eligibility requirements by broadening the scope to add “person employed” in addition to “owner of place of employment” in a related clause.
Self-employed people can subscribe to the insurance but almost all of them choose not to because they find the monthly premium a considerable burden. Of over 5.48 million self-employed, only some 15,000 people, or 0.38 percent are subscribed as of December 2019.
Given the low-income earners consider the premium burdensome, labor experts say the government should shoulder part of the cost, an amount that does not draw backlash from their salaried counterparts.
“Government support is needed up to a level shouldered by most salaried workers, to whom paying the not-so-small amount in monthly insurance is not a choice but an obligation,” Dankook University economist Kim Tai-gi said.
Yet an ill-prepared government spending increase for the drive would fan fiscal soundness concerns. The employment insurance fund saw a 2.8 trillion won ($2.2 billion) in deficit in 2019, a steeper fall from an 808.2 billion won deficit in 2018.
Despite the snowballing deficit, however, labor groups say the problem can be solved if large businesses pay more.
The Korean Confederation of Trade Unions, one of the two umbrella unions in Korea, said the government should reform the insurance scheme to adopt “progressive billing” for large firms, April 17. If need be, the group said, union members would be open to pay more in the monthly premium, as part of efforts to seek mutual growth and cost-sharing.
But businesses find the idea worrisome, saying the raise in premiums required to be paid by employers would fast deteriorate corporate profit, which is already under pressure due to labor-friendly policies compounded by the recent fallout of the pandemic.
“With little discretion over firing and hiring, businesses say fixed labor costs would soar, which in times of crisis weighs down on the corporate margin much heavier with no means of cost reduction. The expansion should be carried out with corporate profit concerns factored in,” Seoul National University economist Kim So-young said.