Transcript Unemployment Insurance : Case study from Korea

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 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 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 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
on 1 July 1995, after a debate that began at the end of the
1960s.
• 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
Jan-Feb
1998
Mar-June
1998
Jul-Sept
1998
Job Security
Program
70+
50+
50+
5+
1+
Job Capacity
Develpt Program
70+
50+
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 workers and assist enterprises
with their job adjustments
Job creation assistance
•Subsidies to assist SMEs in reducing working hours (from 50h/week to 40h 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 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 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 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 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
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 = function of age & insured
period
Job Seeking
Benefit (JSB)
Insured period
Less than
1 year
1 year 3 years
3 years –
5 years
5 years –
10 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 amount
 Early ReEmployment
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 50km 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
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
• 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 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…