[Exclusive] Examining the 3rd Supplementary Budget... 'Youth Work Experience' Hiring Fails to Reach Half

Government Subsidies as a 'Carrot' Policy
Corporate Sentiment Frozen by COVID-19
Target 50,000 but Only 23,000 Participated

[Asia Economy Reporter Jang Sehee] A government program that provides wages to private companies offering job experience to young people has stalled. The program aimed to support young people hit hard by the COVID-19 pandemic, but as the virus resurged, private companies froze hiring. Despite the government’s financial incentives, the COVID-19 crisis had a greater impact on the sentiment of private companies.

According to the Ministry of Employment and Labor on the 13th, the number of participants in the newly established “Youth Job Experience Support Project” from the third supplementary budget in July last year reached only 23,000 by the end of December of the same year. This is less than half of the government’s budget target of 50,000. Of the total budget of 235.2 billion KRW, 190 billion KRW was spent, but even this was not fully disbursed.

The Youth Job Experience Support Project provides up to 880,000 KRW per month for six months to small and medium-sized enterprises that hire young people. This means up to 5.28 million KRW is paid for each young person employed.

The sluggishness of this project is largely due to the second wave of COVID-19 that began in August last year, after the supplementary budget was allocated. The government prepared support measures expecting hiring to increase as the virus was gradually controlled, but the unexpected resurgence caused private companies to close their hiring doors.

A government official stated, “Right after the Youth Job Experience Support Project started, the resurgence of COVID-19 in August and November last year caused many companies to change their hiring plans, making it difficult to meet the targets. Although we promoted the program vigorously, some companies found it difficult to participate due to decreased sales.”

Youth employment is at its worst. Due to COVID-19, the number of employed young people decreased by 183,000 last year, marking the largest drop since 1998 (-616,000). The youth perceived unemployment rate also rose by 2.2 percentage points from the previous year to 25.1%, the highest since 2015.

According to a survey by the job portal Incruit, conducted together with the untact immediate interview platform AlbaCall on the “2021 College Graduate New Hire Plans,” 38.7% of companies plan to hire new employees this year, slightly down from 41.2% last year. Responses indicating “will not hire even one person” accounted for 6.6%, and 16.0% said their hiring plans were uncertain.

The government plans to implement measures to mitigate employment shocks as much as possible, including 1.04 million direct job projects and 50,000 youth digital job projects starting from January, but it is uncertain how the market will respond.

Since employment tends to recover with a lag behind economic recovery, the sense of improvement may be delayed. Experts advise that policies relying solely on fiscal input will struggle to support the shattered employment situation.

Choo Kwang-ho, head of the Job Strategy Office at the Korea Economic Research Institute, said, “It is too burdensome for companies to hire relying only on government support,” adding, “The uncertain investment outlook due to COVID-19 also affected this.” Professor Park Young-beom of Hansung University’s Department of Economics expressed concern, saying, “The market will find it difficult to escape the effects of COVID-19 this year, and since the labor market experiences lagging effects, recovery will be even slower.”