[Exclusive] Weekly 10-Hour Short-Term Workers' Unemployment Benefits Reduced from 920,000 to 460,000 Won

Unemployment Benefits Recognized for 4 Hours Even After Working 2 Hours?
Reform of Unemployment Benefits System Exceeding Wages
"Minimum Wage Increased Significantly, Current System Unfair"
Many Facing Reduced Benefits Are Employment-Vulnerable Groups
"Cutting Benefits Exposes Short-Term Workers to Blind Spots"

The government is significantly reducing unemployment benefits for short-hour workers. This decision is based on the judgment that unemployment benefits exceeding wages are inappropriate. Although it is explained as an inevitable measure for a fair unemployment benefits system, concerns are raised that protection for welfare blind spots may weaken, as most of the beneficiaries facing reduced unemployment benefits are likely low-wage, short-hour workers.

'Even if you work 2 hours, unemployment benefits are recognized as 4 hours'... related regulation deleted

According to a comprehensive report by Asia Economy on the 21st, the Ministry of Employment and Labor has decided to improve the 'Regulation on the Calculation of Daily Basic Wage for Benefits' and its enforcement rules. The daily basic wage for benefits is an indicator calculated under the Employment Insurance Act, meaning 'the amount earned in a day.' It is calculated by multiplying working hours by the hourly wage. Once the daily basic wage for benefits is determined, unemployment benefits are calculated based on it.

The government targeted working hours for improvement. According to the regulation on the daily basic wage for benefits, even if the prescribed daily working hours are 3 hours or less, it is considered as 4 hours. As a result, short-hour workers receive unemployment benefits exceeding their wages. For example, Mr. A, who works 2 hours a day at minimum wage for 5 days a week, receives a monthly salary of 417,989 KRW, but his unemployment benefits approach 923,520 KRW, more than twice as much. Although his actual daily working hours are 2, 4 hours are recognized for calculation purposes.

The Ministry of Employment and Labor has decided to delete this regulation. Although the 'Insured Person's Separation Confirmation Form' did not separately distinguish workers working 4 hours or less, the form will be changed to accurately reflect working hours. Applying the revised regulation will reduce Mr. A's unemployment benefits to 461,760 KRW, about half of what he previously received. Workers with fewer working hours are expected to see a much larger reduction in unemployment benefits.

The government plans to submit this improvement plan to the Employment Insurance Committee's Operations Expert Committee meeting on the 22nd. If approved by the committee, it will undergo internal legal review and administrative notice before being implemented in November.

"Unlike in the past, minimum wage has risen significantly... unfair unemployment benefits must be corrected"

Im I-ja, Chairperson of the Special Committee on Labor Reform of the People Power Party, is speaking at a public hearing on unemployment benefit system improvement held at the National Assembly on the 12th of last month. Photo by Hyunmin Kim kimhyun81@

The background for the government’s policy push is a consensus between the ruling party and the government that 'unemployment benefits exceeding wages are unfair.' On the 12th of last month, the People Power Party’s Labor Reform Special Committee held a public hearing at the National Assembly and decided to consider lowering or eliminating the minimum unemployment benefit. There was also discussion about extending the 180-day work requirement for unemployment benefits to one year. Additionally, strengthening sanctions against false job-seeking activities and special inspections and planned investigations into fraudulent claims were discussed.

Committee Chairperson Im Eija criticized, "Unemployment benefits higher than the minimum wage, unlimited repeated claims, and fraudulent claims hinder job seekers' entry into the labor market," adding, "A significant number of recipients receive unemployment benefits higher than their after-tax income, creating unfairness." Lee Seonghee, Vice Minister of Employment and Labor, also pointed out, "Unemployment benefits exceeding income earned from work are not only difficult for the majority of diligent workers to accept but also seriously undermine labor market fairness, so this issue can no longer be ignored."

There was also internal discussion that the regulation is outdated. A Ministry of Employment and Labor official explained, "The guarantee of 4 hours of work for short-hour workers was established when the system was implemented in 1998, at a time when the minimum wage was much lower," adding, "Now, the minimum hourly wage has risen significantly, and there are many opinions that unemployment benefits are excessive." The official added, "We held many field meetings, and there were voices calling the current system unreasonable."

The financial situation of employment insurance is also worsening. The unemployment benefits account within the Employment Insurance Fund recorded a deficit of 555.7 billion KRW last year. The Employment Insurance Fund reserves were 10.2 trillion KRW in 2017 but recorded a deficit of 3.9 trillion KRW last year due to accumulated unemployment benefit deficits. This is due to the amount of unemployment benefits increasing 3.17 times from 3.4418 trillion KRW in 2012 to 10.9105 trillion KRW last year. As the minimum wage rose, the minimum unemployment benefit also exceeded earned income, reaching 1,847,040 KRW per month compared to earned income of 1,799,800 KRW.

Most of those facing unemployment benefit reductions are vulnerable workers... "Concerns about blind spots"

Recipients visiting the Seobu Employment Welfare Plus Center in Mapo-gu, Seoul, to apply for unemployment benefits. Photo by Jo Yongjun jun21@

However, a significant portion of short-hour workers facing reduced unemployment benefits are vulnerable workers. The government expects that unemployment benefits for social welfare workers (family care workers), cleaning and disinfection workers, university part-time lecturers, care service workers, and guides/customer service representatives will decrease. These jobs typically have unstable employment and poor working conditions. Most unemployment benefits are below 1 million KRW, making it difficult to consider them as 'syrup benefits' (a term meaning unemployment benefits are abused as a sweet bonus). The government is effectively reducing unemployment benefits first for short-hour workers, who are vulnerable, rather than for long-hour workers whose monthly minimum benefits exceed 1.8 million KRW.

The exact number of workers facing reduced unemployment benefits and the scale of savings from reduced payments are not precisely known. The government has not identified related figures. However, short-hour workers have been increasing due to COVID-19 and industrial restructuring. According to the Korea Employment Information Service, the proportion of workers working less than 15 hours per week increased from 3.4% in 2015 to 5.9% last year. Workers working less than 36 hours per week surged from 16% to 30.2%.

This is why concerns arise that while creating a fair unemployment benefits system, a significant portion of vulnerable workers may be shaken. Professor Lee Bongju of Seoul National University’s Department of Social Welfare pointed out, "Korea’s labor market is quite unstable, and if the conditions for receiving unemployment benefits are restricted, unemployed people may fall into poverty," adding, "Reducing unemployment benefits, which have employment stability and welfare functions, could significantly increase the likelihood that short-hour workers will be exposed to blind spots."

The National Assembly Legislative Research Office also expressed similar views in its recently published '2023 National Assembly Inspection Issue Analysis' report ahead of the national audit. The office stated, "If fraudulent claims are not eradicated, it may encourage moral hazard in national projects, leading to fund waste and the risk that those in genuine need may not receive support," but also argued, "The reality of youth and vulnerable groups who must repeatedly claim benefits in an unstable labor market with many temporary and short-term employment forms must be considered."

Meanwhile, the government is conducting a comprehensive reform of unemployment benefits. Currently, it is considering eliminating the linkage between unemployment benefits and the minimum wage or lowering the minimum benefit ratio. It also plans to strengthen supervision and monitoring of fraudulent and repeated claims.