[Yoon Seok-yeol Elected] Half of COVID Loss Compensation Support Fund 'Advance Payment'... Accelerating Pension Reform

Emphasizing Selective Welfare Within Limited Budget
Up to 50 Million Won Support for Small Business Owners

Yoon Seok-yeol, the president-elect of the 20th Republic of Korea, is delivering his victory speech in the early morning of the 10th at the "People Power Party 20th Presidential Election Vote Counting Situation Room" set up at the National Assembly Library in Yeouido, Seoul. [Image source=Yonhap News]

The most urgent health and welfare task facing President-elect Yoon Suk-yeol is the stable end of the COVID-19 pandemic, which has continued for more than two years, and the recovery of people’s livelihoods. Reforming public pensions, including the National Pension Service, is also one of the top priorities the next government must address.

Additional 6 Million Won Payment to Small Business Owners

On the day of the presidential election, the number of new COVID-19 cases exceeded 340,000, marking the peak of the Omicron variant wave. If the critical period of late March to early April, when severe cases are expected to surge, is successfully overcome, the epidemic situation is expected to stabilize around May 10, when the new government officially takes office. For President-elect Yoon, how well he controls the emergence of new variants and implements stable quarantine policies thereafter will be a test to transition into a full-fledged ‘endemic’ phase.

The scale of loss compensation support for small business owners to be promoted with the new government’s launch is expected to increase. Since the damage to small business owners and self-employed individuals has accumulated significantly, there is a strong will to prioritize resolving this issue. President-elect Yoon has pledged emergency support for overcoming COVID-19 as a top campaign promise and secured more than 50 trillion won in fiscal funds to ensure full loss compensation. He also stated, "If I become president, I will immediately provide an additional 6 million won separate from the existing government plan (which provided 3 million won in small business quarantine support), supporting up to a maximum of 10 million won."

First, the loss compensation support amount will be increased up to 50 million won, and a pre-compensation system will be promoted where half of the support amount is paid first. Along with promoting special guarantees exceeding 5 trillion won to meet urgent funding demands, if the debts of self-employed individuals worsen, the government will collectively purchase and manage at-risk debts. A ‘rent-sharing system’ will be introduced, where the state, landlords, and tenants each bear one-third of the rent. After the end of COVID-19, for up to two years, tax support will be expanded, including a temporary 50% reduction in burdens such as value-added tax, electricity, and water bills for small self-employed businesses, a full temporary tax credit for rent reductions, and a temporary expansion of the consumer prepayment tax credit rate. This emergency support program will be managed by the ‘COVID-19 Emergency Support Special Headquarters’ to be established directly under the president.

Pension Reform as the Biggest Challenge

Preparing measures to stably operate social insurance finances in response to the low birthrate and aging society is also one of the top priorities for the new government. The second phase of the income-based health insurance premium system reform is scheduled to be implemented in the second half of this year, and it is necessary to strengthen the required health insurance coverage while preparing sustainable financial management plans.

The National Pension system, which faces high concerns over financial deterioration, also needs revision. President-elect Yoon initially pledged to establish a ‘Public Pension Reform Committee’ directly under the president to devise pension reform plans. He also presented the principle of ‘fair burden sharing between generations so that the pension burden is not excessively placed on the younger generation.’

Welfare policies such as childcare, child, disabled, and elderly welfare, support for low-income vulnerable groups, and strengthening social services will be raised to levels that meet public expectations. President-elect Yoon has emphasized ‘selective welfare’ considering limited budgets. Cash welfare will be executed mainly for the most vulnerable groups, and a two-track strategy will be used, including service-type welfare to increase the willingness to work for those who can work.

The basic livelihood security living allowance payment standard will be raised from 30% to 35% of the median income, providing support to an additional 210,000 people. For households with members who are disabled, children, elderly, or otherwise unable to work, an additional 100,000 won per month will be paid individually. The earned income tax credit income threshold will also be raised by up to 20%, and deductions for earned and business income will be expanded up to 50% when determining basic livelihood security benefits. The basic pension paid to seniors aged 65 and older will be increased from the current maximum of 307,500 won per month to 400,000 won. The clause that reduces the basic pension when receiving a certain level of National Pension will be revised to allow maximum receipt of the basic pension.

President-elect Yoon promised to reduce childcare burdens by providing a monthly parental allowance of 1 million won, totaling 12 million won over 12 months from birth to the child’s first birthday. The parental leave period will be extended from the current one year each for men and women to a combined total of three years (1.5 years each for the couple), and spousal paternity leave will be extended from the current 10 days to 20 days. For infertility treatment support projects, income criteria will be abolished to expand support to all infertile couples, and paid infertility treatment leave will be extended from the current 3 days to 7 days.