"Prevent Repeated Receipt of Unemployment Benefits" Ruling Party Proposes Amendment to Employment Insurance Act

Hong Seok-jun "Improving Moral Hazard Issues"
Preventing Actual Income Reversal in Job-Seeking Allowance Receipt
Extending Insured Unit Period Further Needed

The People Power Party has proposed an amendment to the Employment Insurance Act to address the issue of excessively repeated receipt of unemployment benefits.

On the 26th, Hong Seok-jun, a member of the People Power Party, stated, "I have taken the lead in proposing the amendment to improve the moral hazard problem of repeated claims by exploiting loopholes in the unemployment benefit system and to strengthen support for long-term employees and vulnerable groups."

According to data submitted by the Ministry of Employment and Labor to Representative Hong, the number of recipients who received benefits three or more times over five years surged from 82,000 in 2018 to 102,000 in 2022. As of March this year, the top 10 recipients in terms of unemployment benefit amounts received benefits 19 to 24 times. Their benefit amounts also reached between 80 million and 90 million KRW.

On the 9th, citizens are receiving consultations for unemployment benefits applications and employment support at the Seoul Employment Welfare Plus Center in Jung-gu, Seoul. Last month, the number of new applicants for job-seeking benefits (unemployment benefits) was recorded at 212,000. This is the first time the number of unemployment benefit applicants has exceeded 200,000 per month. The increase in employment insurance subscribers has dropped to the lowest level in 17 years. Photo by Moon Honam munonam@

The reason for repeatedly receiving unemployment benefits lies in some issues with the current system. Under the current unemployment benefit system, 80% of the minimum wage is set as the minimum unemployment benefit amount. However, after deducting income tax and social insurance premiums from the minimum wage, the actual income can become lower than the unemployment benefit amount received. In 2022, among the total 1,628,000 recipients, 27.9% (453,000 people) received unemployment benefits that exceeded their post-tax wages.

Additionally, the current insured unit period (the period used to determine eligibility for unemployment benefits) is 180 days (6 months), which has been criticized as short compared to other countries. This can lead to an increase in cases of short-term employment followed by repeated unemployment. The insured unit period was relaxed from 12 months to 6 months during the 1998 financial crisis response and has been maintained since. Representative Hong argued, "Considering that countries like Germany, Switzerland, and Japan have 12 months, the current period is excessively short."

The core of this amendment is to adjust the insured unit period requirement to resolve the previously raised issues. First, the insured unit period will be extended from 180 days to 10 months. Also, the daily unemployment benefit amount will be uniformly calculated as 60% of the average wage, adjusting both the benefit amount and the insured unit period. Instead, for low-income groups facing financial difficulties, the individual extended benefit will be increased from the current 70% to 90% of the unemployment benefit amount, and the maximum prescribed benefit days for long-term employees will be expanded, thereby strengthening support for vulnerable groups and preferential treatment for long-term employees.

Representative Hong said, "The original purpose of the unemployment benefit system?to protect the livelihood of the unemployed and support early reemployment?should not be undermined, and the system should be promptly improved to provide more support to diligent job seekers and vulnerable groups. If the moral hazard of repeated claims exploiting loopholes in the current unemployment benefit system is left unchecked, it will ultimately harm honest workers who are working diligently."