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Institutional Blind Spots in the South Korean Employment Safety Net and Policy Solutions

Gyeongjoon Yoo

No 28, KDI Focus from Korea Development Institute (KDI)

Abstract: Forty percent of South Korea's employed population falls into institutional blind spots in employment insurance. With more than 10 million people not formally enrolled in employment insurance, the country's primary employment safety net, the best solution may be a phased-in expansion of the Employment Success Package for low earners, an effort that was initially launched as a South Korean model of unemployment assistance. - South Korea has relatively larger blind spots in its employment safety net than the world's more developed countries, leaving it to face the twin tasks of filling in the gaps and tying the social safety net to job creation. - Of those who are eligible for employment insurance, only 72.3% are actually enrolled. In other words, 27.7% of eligible salaried workers—some 4.12 million people—are not enrolled for one reason or another. - It should be more widely recognized that the de facto blind spots in social insurance cannot be resolved through premium assistance alone. Support needs to be combined with punishment for those who deliberately avoid enrollment. - For the most part, social insurance corporations are focused on their existing subscribers, which has led them to neglect the business of finding new ones. - South Korea's benefit payment conditions, levels, and eligibility periods are recognized to fall below the average for other countries. But because premium payments are also correspondingly lower, any increase in benefits will inevitably entail higher premium rates. - Positive results in creating jobs and reducing social insurance blind spots may be expected from a suitable mixture of a reduced lower limit and increased upper limit on benefits, support for premiums to low earners, and increased premium rates for high earners. - The issue of employment insurance enrollment for the self-employed is not a simple one, given the absence of an employer, the hurdles to enforcing mandatory enrollment, and the standards for unemployment. - Generally, unemployment risk does not depend entirely on the worker. Unemployment frequently occurs for reasons beyond the individual's control, which means that it cannot be fully internalized. - The systems for applying social insurance, determining income, and administering microbusinesses require improvement. - Increasing benefits will inevitably entail a higher premium rate, which means that discussions on a suitable level should ultimately be tied to that rate. - In terms of the basic principles of social insurance—mandatory enrollment and income redistribution—it is somewhat unreasonable that benefits are not extended to the most and least secure salaried workers. - Consideration should be given to significantly lowering the 60-working-hour standard, bringing many of these workers within the protections of the employment safety net. - One strong option to consider in addressing the institutional blind spots of South Korea's employment insurance involves expanding the current Employment Success Package system for low earners, which was launched as a kind of South Korean model of unemployment assistance. - Two separate approaches are in order: social assistance for those who cannot work, and a combination of unemployment assistance and unemployment insurance for who can.

Date: 2013
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