The government will overhaul the job-seeker's allowance system paid to workers who lose their jobs. The key is to lower the monthly payment while extending the payment period. The aggregates paid to each person will remain the same. The aim is to fix the "income reversal phenomenon" in which a worker earning the minimum wage receives more in job-seeker's allowance when not working than in wages when working.
In addition, the structure of employment insurance will be revamped in line with the increase in parental leave benefit recipients. Currently, parental leave benefits are paid out of the unemployment benefits account within employment insurance, but the government plans to create a new "work-family balance account" and transfer maternal protection programs such as parental leave benefits to it.
◇ Job-seeker's allowance: lower monthly payments, longer duration
The Ministry of Employment and Labor (MOEL) reported the "results of the employment insurance reform task force discussions" and reviewed the "plan to overhaul the employment insurance system" at the employment insurance committee on the 1st.
According to the ministry, a minimum wage worker receives 1.98 million won over five months in job-seeker's allowance after losing a job. The allowance exceeds the 1.93 million won (after tax) earned when working at the minimum wage. Because of this, some have said the allowance undermines workers' willingness to work. The Board of Audit and Inspection also pointed out the current job-seeker's allowance last year, saying, "Due to a mismatch in the payment method, workers receiving the minimum wage experience cases where the allowance exceeds their wages when working," and noted, "A reasonable improvement plan must be prepared."
The government will change the payment method for the job-seeker's allowance from the current seven days per week to six days per week excluding unpaid holidays, while keeping the total payment and number of payment days the same. To put it briefly under the current standard, the allowance, which was paid at 1.98 million won per month for five months at the floor amount, will instead be paid at 1.7 million won for five months and 1.4 million won in the final, sixth month. Reflecting next year's minimum wage increase, the allowance for the first five months will be 1.76 million to 1.81 million won.
The cap on the job-seeker's allowance, which had been set as a flat amount, will also be converted to a method linked to the floor amount. In principle, the allowance pays 60% of the average wage before separation. However, a cap and a floor are applied together to prevent amounts that are too low or too high. The floor amount is automatically set at 80% of the minimum wage, whereas the cap has been set separately each year by the government, taking into account the fiscal burden on the Employment Insurance Fund. The current cap is 68,100 won per day, and the floor is 66,400 won, which is 80% of the daily minimum wage of 83,000 won.
As the minimum wage has steadily risen each year, the floor amount for the allowance has also increased, but the cap was frozen at 66,000 won from 2019 through last year before being raised to 68,100 won this year. Had the cap not been raised this year, the structure would have been odd, with the floor higher than the cap.
To prevent this inversion between the floor and cap, the ministry will set the cap each year at 103% of the floor. Based on the minimum wage (per day), the floor will be 80% and the cap 82.4%.
The "early reemployment benefit," which pays half of the remaining job-seeker's allowance when a recipient finds a job early, will narrow eligibility. Previously, the benefit was withheld only when monthly income was 5.74 million won or more, but the exclusion threshold will be lowered to 3 million won or more per month. The labor ministry said, "This reform is intended to correct the situation where the benefit was paid even to those who would have found a job early on their own without it."
◇ Surging parental leave benefits to be transferred to a new account
The structure of employment insurance accounts will also be revamped to reflect the increase in parental leave benefits. According to the labor ministry, the number of parental leave benefit recipients reached 184,000 last year, up 39.1% from the previous year. In particular, the number of male recipients of parental leave benefits rose to 67,000. Men accounted for 36.4% of all parental leave recipients.
The problem is that this expansion in parental leave benefit expenditure is increasing the fiscal burden on the unemployment benefits account. A labor ministry official said, "Spending on maternal insurance benefits rose rapidly from 2.1 trillion won in 2022 to 4.3 trillion won last year," and added, "As a result, the Employment Insurance Fund's unemployment benefits account recorded a fiscal deficit of 1.8 trillion won last year."
Accordingly, the government plans to establish a "work-family balance account" (tentative name) by 2028 and transfer programs such as parental leave benefits, which had been funded by the unemployment benefits account. However, the "maternity leave before and after childbirth benefit," for which employers bear the payment obligation, will be incorporated into the "employment stabilization and vocational competency development account."
If implemented as planned, the Employment Insurance Fund's accounts, which are currently split into "unemployment benefits + employment stabilization and vocational competency development," will be divided into three: "unemployment benefits + employment stabilization and vocational competency development + work-family balance."
Funding for the work-family balance account will be expanded in stages, starting with increasing the transfer from the general account to 900 billion won in 2027. Along with this, the worker and employer premium rates for next year's unemployment benefits account will each be raised by 0.1 percentage point. When the work-family balance account is created in 2028, the share to be transferred from the "unemployment benefits account" premium rate will be determined after reviewing the expenditure situation for maternal protection benefits.
The government plans to support legislation in the National Assembly so the related employment insurance reform bills can be revised within the year. Minister Kim Young-hoon of the labor ministry said, "This reform package incorporates both fiscal sustainability and rationalization of the unemployment benefits system," and added, "We will promptly push follow-up measures needed to implement the discussion results."