The Employment Insurance System In Korea
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¥°. Introduction 1. Background 2. Characteristics of the Korean Employment Insurance System 3. Basic Structure of the Korean Employment Insurance System 4. Financial Crisis and the Employment Insurance System ¥±. Coverage 1. Principle of Coverage 2. Coverage Exclusions 3. Trend of Insured Employees ¥². Employment Stabilization Program 1. Program Outline 2. Employment Adjustment Assistance 3. Regional Employment Stimulation Grant 4. Employment Facilitation Assistance 5. Labor Market Information and Job Placement Services 6. Performance of the Employment Stabilization Program IV. Job Skill Development Program 1. Program Outline 2. Assistance to Employers 3. Assistance to Employees 4. Assistance for Training for the Unemployed 5. Performance of the Job Skill Development Program ¥´. Unemployment Benefits 1. Outline of Unemployment Benefits 2. Job-seeking Allowance (JSA) 3. Employment Promotion Benefits 4. Unemployment Benefits Payment ¥µ. Financing 1. Financing Principle 2. Contribution Rate 3. Employment Insurance Fund ¥¶. Administration 1. Administrative Agencies 2. Appeal Process
It was in the early 1970s that Korea began to discuss the need for an unemployment insurance system to stabilize the living conditions of the unemployed. When the first oil shock hit the Korean economy in 1973, the Administration of Labor and some scholars discussed the need for an unemployment insurance system. Those discussions, however, proceeded only informally within the Administration of Labor, and they decided not to discuss it openly because they thought the Korean economy at that time was too underdeveloped to implement the system efficiently. When the second oil shock and political turmoil caused by the assassination of former president Park Chung-Hee hit the Korean economy in 1979, the economy recorded a negative economic growth rate, and the unemployment rate reached 7.5 percent in 1980. The high unemployment in the early 1980s forced the Korean government to consider introducing the unemployment insurance system when the Korean government designed the Fifth Five-Year (1982-1986) Economic and Social Development Plan in 1981. Even in the early 1980s, however, most Koreans were opposed to introducing the unemployment insurance system because they believed it would weaken the job search efforts of the unemployed, thereby resulting in a higher unemployment rate. Moreover, many people thought the time was not yet right mature for Korea to introduce the unemployment insurance system because the Korean economy was not strong enough to implement it. Hence, the Korean government decided not to introduce the unemployment insurance system during the 1980s. In the process of discussing the unemployment insurance system in 1981, however, Korea achieved a very important social consensus on the direction of the Korean system. This was that the government should not seek to address unemployment with a cash benefits. Rather, the important thing was to prevent unemployment itself through stable economic growth and an efficient labor market system. In this respect, they agreed to name the future Korean system the Employment Insurance System rather than the Unemployment Insurance System. After successful economic development since 1960s, the Korean economy faced a turning point in the late 1980s. The average GNP growth rate during the 1962-1988 period was 8.8 percent. The per capita GNP increased remarkably from USD82 in 1962 to USD4,127 in 1988. As a result of rapid economic growth, the Korean economy ranked 17th in total GNP and 12th in trade amount in the world in 1988. Until the 1970s, Korea's rapid economic development was mainly due to diligent, cheap and abundant labor. However, economic development absorbed abundant labor from the rural areas, and Korea's ¡°unlimited supply of labor¡± ended in the mid-1970s. With the fall of the authoritarian regime in June 1987, Korea underwent rapid political, social and economic changes. The Korean economy suffered from explosive labor disputes from the second half of 1987 to 1989 and high increases in wages until 1996. Workers no longer accepted dirty, difficulty and dangerous jobs, and thus labor-intensive manufacturing sectors suffered from serious labor shortages from the end of the 1980s. Labor was no longer a cheap resource in Korea. High increases in wages and the labor shortage forced the Korean economy to convert from a labor intensive economy to a technology intensive economy, and this transformation in the economy created a considerable mismatch between the skills workers actually possessed and those needed for jobs. Strong trade unions demanded a lot of economic and social reforms from the government and employers. Introducing the Employment Insurance System became the top priority. The depletion of cheap labor, strong trade unions and a considerable mismatch between workers' skills and occupations called for a new paradigm in economic and labor management strategies in Korea. In 1990, the Korean government assigned several public research institutes to design a specific area of the Seventh Five-Year (1992- 1996) Economic and Social Development Plan. The Korea Labor Institute was in charge of designing labor policies for the year 1992-1996. It recommended the government to introduce the Employment Insurance System and provided an outline of the Korean system. The Government reviewed the proposal from the Korea Labor Institute and held several public hearings. It later confirmed that most people supported the proposal. On August 23, 1991, Korean government finally decided to introduce the Employment Insurance System during the mid-1990s. On March 9, 1992, the government decided to ask the Korea Labor Institute to design a detailed Korean Employment Insurance System. At the government's request, the Korea Labor Institute launched the Employment Insurance Research Commission on May 18, 1992. The Commission was composed of 28 scholars, and observers from the government, management and labor were invited to participate in the discussion process of the Commission. The role of the Commission was to design the Korean Employment Insurance System in detail and carry out the necessary research. The Commission studied the unemployment insurance systems and experiences of many developed countries, as well as Korea's labor market conditions. After one year of research and a series of workshops and seminars with representatives from the government, labor, management and academia, the Commission presented its research findings and policy recommendations to the government on May 18, 1993, under the name, Proposed Employment Insurance System for Korea. The government then collected opinions of various strata of society through public hearings, created the Employment Insurance Bill based on the Commission's recommendations and submitted it to the National Assembly in September 1993. The National Assembly passed the bill unanimously on December 1, 1993, promulgating it on December 27, 1993. The Employment Insurance Law was put into effect on July 1, 1995, and the unemployment benefits, which requires at least a year's contribution by the insured, became operational from July 1, 1996.

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