Korea introduced the unemployment benefit program in 1995 to help jobless people maintain a stable living and find a new job. As the economy and the labor markets have changed, the program should change, too. Against this backdrop, this report analyzed and assessed the historical performance of unemployment benefits and explored the ways to improve the program for the future.
Although the proportion of people receiving unemployment benefits has increased from 20.1% in 2004 to 42.7% in 2013, it is still quite low compared to other countries. It is mainly because many people are not covered by employment insurance. This problem should be first addressed to allow more people to benefit from unemployment benefits. Although the primary purpose of employment insurance is to provide protection when people lose their jobs, those who are not covered by this insurance are, ironically, more prone to job loss.
Although the government improved the eligibility criteria in an attempt to encourage reemployment of jobless people, it is not translating into an actual increase in rehiring. Instead, the average number of days for which job seekers received the so-called “job seeking benefits” increased from 88.8 days in 2004 to 89.2 days in 2013. this is because the burden of proof supporting the job seeking activities is on the recipient, not on the employment center which processes the payment, and the employment center is not providing sufficient support for the jobless people to actively find a new job. To tighten the control over unemployment insurance payment, it is recommended to beef up relevant staff. A good example is the Seoul Employment Center. After it added more people responsible for the unemployment benefit payment, the reemployment rate of the beneficiaries increased while the number of jobless people who exhausted their benefits decreased.
A quantitative analysis of the impact that the eligible period for the job-seeking benefit payment has on reemployment, based on eligibility and payment data extracted from the employment insurance system, shows that the shorter the eligible period, the quicker the beneficiary finds a new job. However, they also tend to quit the new job shortly after and are highly likely to receive job-seeking benefits again. Given this behavior, if the eligible period is extended, it may prolong the unemployed period over the short run, but will ultimately encourage people to find a stable new job and help prevent repeated benefit payments to the same people. Specifically, it is recommended to extend the minimum eligible period from 90 to 120 days. This extension may result in more benefit payments over the short term. But this short-term increase will ultimately be offset by the long-term reduction in payments as people stay longer with their new job and do not claim the benefits for a second time.
The effect of the policy reform made in 2010 regarding “reemployment benefits” was also analyzed using a quantitative model. Although the number of people receiving the reemployment benefits came down, it did not have a significant impact on reemployment itself. After the policy change, the reemployment rate in the early days of job-seeking benefits declined moderately but it was offset by the increase in reemployment in later days. All these numbers indicate that the government’s policy reform was directionally right and it should be sustained in the future as well.
Lastly, the share of maternity protection benefits out of the total unemployment benefits grew from 2.8% in 2002 to 14.3% in 2013. In other words, maternity protection benefits are posing a threat to the fiscal soundness of the unemployment benefit account. It is necessary to come up with a measure to share this burden in order to ensure financial stability of the unemployment benefit account and enhance social equity.
Although the proportion of people receiving unemployment benefits has increased from 20.1% in 2004 to 42.7% in 2013, it is still quite low compared to other countries. It is mainly because many people are not covered by employment insurance. This problem should be first addressed to allow more people to benefit from unemployment benefits. Although the primary purpose of employment insurance is to provide protection when people lose their jobs, those who are not covered by this insurance are, ironically, more prone to job loss.
Although the government improved the eligibility criteria in an attempt to encourage reemployment of jobless people, it is not translating into an actual increase in rehiring. Instead, the average number of days for which job seekers received the so-called “job seeking benefits” increased from 88.8 days in 2004 to 89.2 days in 2013. this is because the burden of proof supporting the job seeking activities is on the recipient, not on the employment center which processes the payment, and the employment center is not providing sufficient support for the jobless people to actively find a new job. To tighten the control over unemployment insurance payment, it is recommended to beef up relevant staff. A good example is the Seoul Employment Center. After it added more people responsible for the unemployment benefit payment, the reemployment rate of the beneficiaries increased while the number of jobless people who exhausted their benefits decreased.
A quantitative analysis of the impact that the eligible period for the job-seeking benefit payment has on reemployment, based on eligibility and payment data extracted from the employment insurance system, shows that the shorter the eligible period, the quicker the beneficiary finds a new job. However, they also tend to quit the new job shortly after and are highly likely to receive job-seeking benefits again. Given this behavior, if the eligible period is extended, it may prolong the unemployed period over the short run, but will ultimately encourage people to find a stable new job and help prevent repeated benefit payments to the same people. Specifically, it is recommended to extend the minimum eligible period from 90 to 120 days. This extension may result in more benefit payments over the short term. But this short-term increase will ultimately be offset by the long-term reduction in payments as people stay longer with their new job and do not claim the benefits for a second time.
The effect of the policy reform made in 2010 regarding “reemployment benefits” was also analyzed using a quantitative model. Although the number of people receiving the reemployment benefits came down, it did not have a significant impact on reemployment itself. After the policy change, the reemployment rate in the early days of job-seeking benefits declined moderately but it was offset by the increase in reemployment in later days. All these numbers indicate that the government’s policy reform was directionally right and it should be sustained in the future as well.
Lastly, the share of maternity protection benefits out of the total unemployment benefits grew from 2.8% in 2002 to 14.3% in 2013. In other words, maternity protection benefits are posing a threat to the fiscal soundness of the unemployment benefit account. It is necessary to come up with a measure to share this burden in order to ensure financial stability of the unemployment benefit account and enhance social equity.