The National Assembly Budget Office evaluated major job creation programs for those with low employability, including the Youth Internship Program for SMEs, Support Program for Converting Non-regular to Regular Workers, and Support Program for Inter-generational Coexistence, with the total budget allocated to these programs in 2015 reaching KRW 940.065 billion.

  These job creation programs for those with low employability, as key projects to achieve the governmental target of 70% employment, seem to have contributed to boosting the employment rate of South Korea, but their performance in terms of the quality of jobs is assessed as less satisfactory. In particular, since the percentage of low-wage and temporary workers is relatively higher in South Korea than those of other OECD member countries, it is recommended to strengthen the financial support to resolve the nation’s bipolarized labor market structure.

  According to the assessment results of each program, the employees of the Direct Job Creation Program turned out to have an extremely low employability rate in the private sector when each program was terminated. This could permanently trap them in a low-wage cycle as most jobs offered by the program pay salaries only at the level of the minimum cost of living.

  The Youth Internship Program for SMEs, one of the most representative job creation measures for young people, has improved its drop-out rate and the conversion rate to regular workers. However, due to a weak increase in their wages, the youth showed a high turnover rate even after being promoted to regular workers. Therefore, it is necessary to enhance direct support for employees to narrow the gap between the proposed salary from employers and the reservation wage of the youth, thereby proactively dealing with the mismatch between the human resources supply and demand for SMEs.

  The Support Program for Converting Non-regular to Regular Workers showed a very low performance in its execution rate as it was not attractive for employers who had to incur burdensome labor costs when participating in the policy. The program could also create a distortion in practice if employers were to recruit all new employees as non-regular works to receive its subsidies. Therefore, considering that SMEs are more sensitive to wage increases than to converting non-regular to regular workers, the incentive scheme of the program needs to be revised.

  The Support Program for Inter-generational Coexistence and the Tax Benefits for Youth Employment, programs to support the new recruitment of young people as regular workers, are expected to have a limited effect as they provide smaller subsidies than if youth are converted into regular workers after hiring them as temporary workers, while having a stricter obligation for continued employment. Therefore, it is advised to adjust the benefits and beneficiary conditions of the programs. In addition, given that overlapping and excess subsidies might be provided through similar programs such as employment promotion funding, a measure to minimize such allocative inefficiency needs to be developed.