[End of Employment Retention Subsidy] Experts Urge Re-extension to Prevent Chain Employment Crisis

Up to 70,000 KRW Daily Support Ends March 31
Ministry of Employment: "No Effect Even with Increased Government Aid"
Concerns Over Chain Impact on Aviation and Others

[Asia Economy Reporters Hyunji Kwon and Gyumin Oh] Non-regular workers in the aviation and transportation industries are left in the blind spots of government support. As the government has introduced support policies mainly targeting small business owners and self-employed individuals, such as loss compensation, quarantine support funds, and low-interest loans, measures for workers in affected sectors like aviation have been relatively neglected.

The only measure the government has provided for these groups is the Employment Retention Subsidy. However, even this is only a temporary fix. The government designated 14 industries, including travel, tourism, and transportation, which were particularly hard hit by COVID-19, as Special Employment Support Sectors, providing employers with up to 70,000 KRW per day (66,000 KRW per day for general industries) in employment retention subsidies. This support will end on March 31. Once the designation ends, the support limit will decrease from 90% to 67% of the leave allowance. From the employer’s perspective, this means a greater burden on labor costs. As a result, there is a possibility that employers may choose to lay off workers instead of utilizing the support system.

This year, the budget for the Employment Retention Subsidy has already been significantly reduced. According to the Ministry of Economy and Finance and the Ministry of Employment and Labor, this year’s related budget is 597.6 billion KRW, which is only about one-third of last year’s budget including supplementary budgets (1.8852 trillion KRW). Even if the employment insurance fund operation plan is revised, only up to 20% (100 billion KRW) of the budget can be supplemented, so the possibility of an increase is low.

▲Employment Retention Subsidy Budget for 2020-2021 (Source: Ministry of Economy and Finance, Ministry of Employment and Labor)

According to the Ministry of Employment and Labor on the 20th, the number of businesses and employees who received subsidies last year as part of the Special Employment Support Sectors reached 7,419 and 140,231 respectively. Although the number slightly decreased last year, 111,850 people still depended on the subsidies. If the Special Employment Support Sector designation ends, more than 110,000 people will be exposed to the threat of layoffs.

Experts agree that the designation period for Special Employment Support Sectors should be extended given the ongoing COVID-19 emergency. Professor Byunghoon Lee of the Department of Sociology at Chung-Ang University said, “If the damage caused by COVID-19 to these sectors is not resolved after the system ends in March, it is necessary to extend the period.”

These industries have yet to recover from the impact of COVID-19. According to the ‘Service Industry Production Index by Industry’ released by Statistics Korea, the production indices for intercity bus transportation, air passenger transportation, and air transportation support services, which were above 100 before COVID-19, stood at 48.3, 25.5, and 44.7 respectively in November 2021. Considering that the production index for restaurants and bars, which also declined after COVID-19, recorded 107.1 during the same period, these sectors are significantly lagging behind.

There are also opinions emphasizing the importance of maintaining employment in aviation and transportation sectors. Professor Moonkil Yoon of the Department of Business Administration at Korea Aerospace University explained, “The aviation and transportation industries have a large employment creation effect and are organically connected with industries such as travel, tourism, and services,” adding, “Employment in aviation and transportation must be stabilized to prevent a chain employment crisis.”

There are calls to raise the government’s support limit for the Employment Retention Subsidy to 100% to reduce the burden of employers’ share of leave allowances. Sangbong Oh, a research fellow at the Korea Labor Institute, analyzed in his paper ‘Reform Plan for Employment Retention Subsidy in Response to COVID-19’ that “the current Employment Retention Subsidy policy is not sufficient to increase employers’ incentives to retain employment,” and argued that “the government’s support rate for leave allowances should be raised to 100%.” In fact, countries such as Germany, France, the UK, and the US have implemented measures to reduce employers’ employment retention burdens to virtually zero after the COVID-19 outbreak.

A Ministry of Employment and Labor official commented on this, saying, “It is questionable whether raising the government support limit to 100% would yield corresponding improvements in employment,” and added, “Since government budgets are limited, it is necessary to carefully consider the support period, amount, and limits comprehensively before making a decision.”