Registered unemployment is low in Korea. But with high rates of labour market inactivity, overall rates of joblessness are substantial nonetheless. A sizeable share of working-age Koreans is also in unstable jobs in a large number of small and very small enterprises. This coincides with better-protected jobs in larger or very large businesses. Korea’s “dual” labour market is associated with sizeable productivity gaps between large firms and SMEs. In this context, protecting people, rather than specific jobs, plays a key role in promoting an inclusive and dynamic labour market (OECD, 2018[1]). Effective unemployment benefits help to reduce inequality, and they strengthen productivity by facilitating an efficient re‑allocation of jobs and a good match between workers’ skills and job requirements. As such, they are a crucial policy lever for adapting to the major societal, technological and environmental transitions of our time.
The design and accessibility of unemployment benefits is not only relevant for the comparatively small number of openly unemployed people, i.e. those without work, who are actively looking for a job, and are available to take up employment. Benefit design also matters for the large number of jobless who are currently outside the labour force. Indeed, a stated “inactive” status as provided in labour force surveys does not necessarily imply that those concerned cannot or do not want to work. Accessible unemployment support can serve to reduce inflows into inactivity, bring inactive people back into the labour force and increase their chances of finding suitable employment. With the fastest-ageing society of any OECD country, mobilising inactive people into productive employment is vital for Korea in particular.
The OECD has recommended on different occasions that Korea consider reforms to make unemployment support more accessible and more supportive of re‑employment in good-quality jobs (OECD, 2018[2]; OECD, 2020[3]; OECD, 2013[4]). Indeed, the policy debate on the need to expand the coverage of income safety nets goes back to the Asian foreign currency crisis of 1998 (Park et al., 2001[5]). New results show that income support in the event of job loss remained markedly more difficult to access in Korea than in other OECD countries. For those receiving benefits, support levels prior to the COVID‑19 pandemic were modest, offering comparatively weak income insurance and protection from poverty (Figure 1.1). Although benefit amounts are low overall, the evolution of unemployment benefits in Korea during past decades has nevertheless eroded work incentives for some groups, especially for minimum wage earners and others with limited earnings potential. To confront these challenges, the Korean Government has initiated an ambitious reform programme, including the introduction of a new unemployment assistance, and consultations with stakeholders to broaden the coverage of Korea’s Employment Insurance (EI) system.
The current reform momentum presents a unique path towards reduced inequality and stronger labour market performance. This report aims to provide Korea with input into the design and implementation of ongoing reforms, and it discusses options and priorities for additional policy changes. Section 1 summarises the case for protecting people (rather than specific jobs) in the Korean context and highlights the key role of unemployment benefits in furthering inclusiveness and economic dynamism in a changing world of work. Section 2 summarises the origins and key parameters of unemployment benefits in Korea. Section 3 situates Korea’s unemployment support relative to policies in other OECD countries. Section 4 considers a range of policy options for addressing key challenges and relates them to recent or ongoing reform initiatives in Korea.
Two additional reports accompany and complement the present analysis. An empirical analysis quantifies “blind spots” in income support across OECD countries, providing a comparative perspective on the challenges in Korea prior to the recently enacted reform steps (Immervoll et al., 2022[6]). A related policy report discusses priorities and pathways for introducing equitable and adequate paid sick leave in Korea (OECD, 2023[7]).
