Unemployment benefits of up to 1 million won a month for young people who quit voluntarily under consideration... “Little concern about moral hazard”

[Financial News] As the government considers a plan to pay job-seeking benefits (unemployment benefits) of up to 1 million won a month even to young people who quit voluntarily, an analysis by the National Assembly Research Service has found that concerns about moral hazard are not significant, given the benefit level and number of payments.
However, the report says the government should address equity concerns involving young people who have been unable to enroll in employment insurance, while also tackling structural problems—including low wages and poor working conditions—that encourage young people to quit voluntarily.
On the 9th, the National Assembly Research Service said that a report containing these findings had recently been published. Titled “What Is Being Overlooked in the Debate Over Introducing Unemployment Benefits for Young People Who Quit Voluntarily? : The Need to Explore Ways to Protect Young People Outside the System and Provide Practical Employment Support,” it examines the issue.
The Ministry of Employment and Labor previously said in its work report for the second half of this year that it would consider paying job-seeking benefits once in a person’s lifetime even if a young person under 35 quits voluntarily.
The proposed benefit would be 60% of wages before changing jobs, up to 1 million won a month. Specific eligibility requirements and benefit levels are to be determined after consultations between labor and management.
Concerns have been raised that people might take a job and then quit in order to receive job-seeking benefits, or that the policy could encourage unnecessary job changes. Equity concerns over support being available only to young people enrolled in employment insurance, as well as the financial sustainability of the insurance system, have also emerged as issues.
The National Assembly Research Service said, “Given the proposed benefit of up to 1 million won a month and the condition that it would be limited to once in a person’s lifetime, concerns about moral hazard are not significant.” It explained, “If the period during which benefits are restricted for voluntary resignations is appropriately set based on the time required to move between jobs, this could help prevent moral hazard and improve budget efficiency.”
Japan and Germany currently apply benefit-restriction periods of one month and 12 weeks, respectively, as a general rule for voluntary job changes.
The National Assembly Research Service said that South Korea, too, could set a benefit-restriction period based on the time it takes to find a new job after leaving one. An analysis of the time taken to move between jobs, based on the dates people enrolled in and left employment insurance, found that 46.7% had moved to a new job within 30 days and 61.3% within 90 days.
Closing gaps in employment-insurance coverage was also identified as a key task. Since young people enrolled in employment insurance are more likely to work in relatively stable jobs, the report said steps are needed to address the exclusion of more vulnerable young people from support.
As of 2023, an estimated 550,000 young people aged 15 to 34 were not covered by employment insurance because they were non-wage workers. Artists and labor service providers, in particular, can fall through the cracks because of employers’ reluctance, a lack of awareness of the system, or difficulties with the enrollment process.
The National Assembly Research Service recommended that the government “introduce the income-based employment-insurance system it is pursuing without disruption, and actively identify people who have been left off the rolls using national tax income data and provide them with information on enrollment.”
It added, “The government should consider lowering the threshold for young people to enroll in social insurance for the first time, without restrictions based on wages or workplace size, and should continuously monitor support outcomes and whether coverage is maintained after support ends to improve the system’s effectiveness.”
The report also emphasized policies to prevent young people from quitting unnecessarily, alongside support for job changes. It proposed improving the quality of work experience so young people can gain a full understanding of actual job duties and workplace culture before starting a job, and providing specific information on key details such as pay, working hours and job responsibilities in job postings.
It also called for efforts to address low wages, poor working conditions and long hours, which are among the main reasons young people quit. This includes narrowing the wage gap between large and small and medium-sized companies, and improving workplace hygiene, safety and organizational culture.
It also urged the government to consider linking business support programs such as the Youth Employment Leap Subsidy not only to the number of young people hired, but also to working conditions, training plans and their implementation, and improvements in wages and the work environment.
[email protected] Ahn Ga-eul Reporter