Unemployment Insurance Case study from Korea Valerie Schmitt

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Unemployment Insurance : Case study from Korea Valerie Schmitt & Celine Felix ILO DWT

Unemployment Insurance : Case study from Korea Valerie Schmitt & Celine Felix ILO DWT Bangkok 20 December 2010

Structure of the presentation • Brief description of the EI scheme • Progressive development

Structure of the presentation • Brief description of the EI scheme • Progressive development of the scheme • Detailed description of the EI scheme – Job security program – Job Capacity Development Program – Unemployment benefit • Crisis impact and role of the EI scheme

Brief description of the EI scheme Job Creation Program Job Security Program Job Adjustment

Brief description of the EI scheme Job Creation Program Job Security Program Job Adjustment Support Program Stabilization & Achieving full employment is key to counter the vicious cycle of unemployment lower consumption & demand recession Program for the Promotion of the Employment of the Disadvantaged Job Capacity Development Program Maintain and increase capacities & performance Incentives for “on the job training” Workplace = not only to work but to develop skills, and increase performance Unemployment Benefit Unemployment benefits Incentives to find a job Incentives to undertake training

Brief description of the EI scheme • Employment Insurance (EI) goes one step further

Brief description of the EI scheme • Employment Insurance (EI) goes one step further than Unemployment Insurance (UI). • UI simply supports livelihood of the workers who have lost their jobs. It’s a passive medium as it helps people only after they have lost their jobs. • EI is positive and preventive compared to UI.

Progressive development of the scheme • The Korean Employment Insurance (EI) system was introduced

Progressive development of the scheme • The Korean Employment Insurance (EI) system was introduced on 1 July 1995, after a debate that began at the end of the 1960 s. • The coverage of Korean EI system was expanded step by step; it now includes all businesses with one or more employees theoretically. – The coverage rate of the EI scheme reaches around 56. 8% of wage workers in August 2008 due to the large number of irregular workers. The coverage rate only for regular workers is approximately 80% in 2008. • Contribution rates have also increased – Unemployment benefits: from 0. 6% (1995) to 1. 0% (1999) and then reduced to 0. 9% (2003). 50/50 paid by employer and employee. – Job security program: from 0. 2 to 0. 3% (1999) and then reduced to 0. 15% (2003) – Job capability development program: between 0. 1 and 0. 7% since 1999

Progressive development of the scheme Ordinary businesses (number of employees) Until 31 Dec 1997

Progressive development of the scheme Ordinary businesses (number of employees) Until 31 Dec 1997 Jan-Feb 1998 Mar-June 1998 Jul-Sept 1998 Job Security Program 70+ 50+ 5+ 1+ Job Capacity Develpt Program 70+ 50+ 5+ 1+ Unemployment Insurance 30+ 10+ 5+ 5+ 1+ Oct 1998 Today Construction Business (Total Construction Price in Million Won) JSP, JCDP, UI Until 30 June 1998 July 1998 – Dec 2003 Jan - Dec 2004 Jan 2005 - Today 3400 or more 340 or more 20 or more All Workers Undertaken by Licensed Constructors

Detailed description of the scheme Job security program • Purpose: secure job stability of

Detailed description of the scheme Job security program • Purpose: secure job stability of workers and assist enterprises with their job adjustments Job creation assistance • Subsidies to assist SMEs in reducing working hours (from 50 h/week to 40 h and hiring a new employee) • Subsidies for shift work systems (ex: from 3 shifts of 8 hours to 4 shifts of 6 hours in semi-conductor industry and hiring a new “shift” i. e. group of employees) • Subsidies for improved environment in SMEs • Subsidies for new market entry of SMEs (ex: enter green energy market … subsidies for the appropriate investment) • Employment retention subsidy; reemployment subsidy (the government assists in reemploying laid off workers)

Detailed description of the scheme Job security program • Purpose: secure job stability of

Detailed description of the scheme Job security program • Purpose: secure job stability of workers and assist enterprises with their job adjustments Subsidies for Job adjustment • Subsidies for keeping jobs … restrictions on overtime, temporary closing the business unit, more holidays, training of employees, giving leaves, relocation of human resources to other working place … • Subsidies to adjust the number of employees: reduce or stop employing people, do not replace workers who retire, accepting applications for early retirement Subsidies to encourage employment • Subsidies for the employment of elderly; young professionals; trained middle aged workers • Peak age plan (the worker receives less than their peak salary after a certain age) • Childcare leave subsidy & Subsidy for post-pregnancy / childbirth female employment

Detailed description of the scheme Job security program • Purpose: secure job stability of

Detailed description of the scheme Job security program • Purpose: secure job stability of workers and assist enterprises with their job adjustments Aid to construction workers • Subsidy of the contributions for the retirement allowance of construction workers • Subsidy to stabilize employment of construction workers Aid to child care facilities in the workplace • Support to the establishment of childcare facilities in workplaces • Subsidy of the wages of teachers, …

Detailed description of the scheme Job Capacity Development Program • Purpose: assist businesses and

Detailed description of the scheme Job Capacity Development Program • Purpose: assist businesses and the workers to develop workers skills and employability Subsidies for employers • Subsidy for skills development training • Subsidies for paid training leave • Loan for training facilities and equipment Subsidies for workers: employed & unemployed • Assistance to the employed workers: allowance for education fee, student loan for workers, loan for training fee, subsidy for qualification test fee • Aid to the unemployed: training for those who are changing jobs, training for priority occupational areas Main results • Over 210, 000 workplaces assisted in 2008 through the JCDP • Over 3, 6 million workers or unemployed receiving assistance in 2008

Detailed description of the scheme Unemployment insurance • Unemployment benefit helps workers who lost

Detailed description of the scheme Unemployment insurance • Unemployment benefit helps workers who lost their job by providing them with a benefit + by helping them to find a job • The UB also supports the job matching system by providing information on supply and demand of jobs • UB includes: Job Seeking Benefit (JSB) Sickness Benefit (SB) for those who cannot be employed because of sickness or injury Extended Benefit (EB) Unemployment Benefit (UB) Early Re-Employment Allowance (ERA) Allowance to Promote Employment (APE) to assist UB beneficiaries to find a new job quickly Job Capacity Developt Allowance (JCDA) Allowance for Seeking Job in remote Place (ASJRP) Moving Allowance (MA)

Detailed description of the scheme Unemployment insurance • Amount of Job Seeking Benefit (JSB)

Detailed description of the scheme Unemployment insurance • Amount of Job Seeking Benefit (JSB) Requirements Duration Payment amount • Having worked for more than 180 days in a work place where the EI applies • Must actively seek for a job • Exclusion: voluntary resignation or dismissal for serious misconduct Between 90 days and 240 days depending on the insured period and age of insured person • 50% of average wage he/she had received before leaving the job • Max/Day= 40, 000 Won (i. e. 35 US $) • Min/Day= 90% of minimum hourly rate

Detailed description of the scheme Unemployment insurance • Duration of Job Seeking Benefit =

Detailed description of the scheme Unemployment insurance • Duration of Job Seeking Benefit = function of age & insured period Job Seeking Benefit (JSB) Insured period Less than 1 year 3 years – 5 years – 10 years and over Under 30 years 90 90 120 150 180 30 -50 years 90 120 150 180 210 50 years and over, disabled person 90 150 180 210 240 Age

Detailed description of the scheme Unemployment insurance Allowance to Promote Employment (APE) Requirements Payment

Detailed description of the scheme Unemployment insurance Allowance to Promote Employment (APE) Requirements Payment amount Early Re. Employment Allowance (ERA) A person who gets a job before the prescribed duration of UB 1/3 to 2/3 of unpaid Job Seeking Benefit. Min/Day= 90% of minimum hourly rate Job Capacity Development Allowance A person who attends a Job Capacity Development Training (within Job Center) Travel and food expenses during the training period 5, 000 Won / day (4. 3 US $) Allowance for seeking job in remote place A person who is seeking a job more than 50 km away from his/her residence Accommodation cost (up to 40, 000 Won / day), actual travel costs Moving allowance A person who needs to move his/her home to get a job Actual costs ; 80% of actual costs exceeding 2. 5 tons

More information on Korean EI Scheme

More information on Korean EI Scheme

Crisis impact and role of the EI scheme • • Asian Financial Crisis struck

Crisis impact and role of the EI scheme • • Asian Financial Crisis struck in 1997 Series of bankruptcy Massive layoffs Unfortunately the Unemployment Benefit system of Korea was not well constructed at that time, even though the Korean government introduced the Employment Insurance system in 1995. • Therefore the government tried to overcome the catastrophic situation by setting out temporary welfare programs and active labour market policies like public works for the unemployed. • The steep reduction of unemployment rate (from 7. 0% in 1998 to 3. 8% in 2001) shows that the policy mix of Korean government successfully overcame the mass unemployment situation whether the contribution was small or great. • The Korean example shows that the timely investment in UI enables countries to emerge strengthened from crises.

Crisis impact and role of the EI scheme

Crisis impact and role of the EI scheme

Crisis impact and role of the EI scheme • The recent crisis led to

Crisis impact and role of the EI scheme • The recent crisis led to increase in unemployment rate in 2009, while young people found it most difficult to find jobs. • In 2008 -09 the employment situation in the labour market did not go into deep crisis as in the 1997 -8 Asian economic crisis

Crisis impact and role of the EI scheme • The reasons are: – The

Crisis impact and role of the EI scheme • The reasons are: – The economic impact of the 2008 -09 economic crisis was not so great in the Korean context – The government put efforts to retain existing jobs and create new ones in the labour market and temporary jobs through public works – A range of social policy instruments were already in place to provide social protection, particularly the Minimum Living Standard Guarantee and the Employment Insurance Programme, while ten years ago the welfare state was not equipped with adequate social protection instruments

Thank you! THANK YOU! Discussion…

Thank you! THANK YOU! Discussion…