Strengthening Active Labour Market Policies in Korea

2. Organisation of active labour market policy provision in Korea

Marius Lüske
OECD

Abstract

This chapter provides an overview of the organisational framework of active labour market policies (ALMPs) in Korea. It describes the growing role of ALMPs in the Korean labour market and discusses the different stakeholders involved in the provision of ALMPs, showing that the organisational framework is complex. The chapter also explores the monitoring and evaluation processes that are used to assess the effectiveness and efficiency of ALMPs in Korea.

2.1. Introduction

In recent years, the importance of active labour market policies (ALMPs) has grown in Korea. The Korean labour market is evolving rapidly amid several transformative mega-tends, most notably the digitalisation of the economy, rapid population ageing and the green transition, and it is a key priority to enhance employment opportunities for all, skills development, and workforce adaptability. In this context, ALMPs are at the forefront of strategies aimed at increasing employment, fostering economic resilience, and ensuring that the workforce remains competitive and well-equipped to navigate the modern job market.

This chapter provides an overview of the organisational framework of ALMP provision in Korea, preparing the grounds for further discussions in the following chapters, and presents policy examples illustrating how other OECD countries organise their ALMP systems. After a short discussion on the main challenges and opportunities in the Korean labour market (Section 2.2), the chapter depicts how Korea currently uses ALMPs to support employment (Section 2.3). The discussion provides a general overview of ALMP spending and the composition of the ALMP basket in Korea, laying the foundations for a more in-depth analysis of ALMPs for vulnerable groups in Chapter 4. Following this, the main key institutions providing ALMPs or related services (e.g. social services) are presented (Section 2.4), which should be seen in conjunction with a more detailed discussion of the Korean Public Employment Service (PES) in Chapter 3. The chapter then analyses how ALMPs are monitored to ensure high service quality (Section 2.5). The final section summarises the key findings of the chapter.

2.2. Trends and challenges in the Korean labour market

This section summarises the main trends and challenges in the Korean labour market. It shows that unemployment levels are low, but that joblessness is nevertheless common among young and prime‑aged people, most notably due to the deeply enrooted duality of the Korean labour market. In addition, the Korean labour market faces further challenges, including very rapid population ageing and limited labour market prospects for women with children.

2.2.1. Unemployment is low, but the deeply enrooted duality of the labour market is an obstacle to higher employment rates

The Korean labour market is overall strong yet encounters structural challenges. The unemployment rate is among the lowest in the OECD, at 2.9% in 2022 among 15‑64 year‑olds, and has been constantly below 5% for more than two decades, including throughout the COVID‑19 pandemic. No other OECD country except for Norway can look back on an equally long track record of low unemployment levels. In comparison to other countries, unemployment rates are low for all age groups, and for both men and women, highlighting that low unemployment is a general phenomenon concerning large parts of the population and is not only restricted to a few specific groups.

Nevertheless, inactivity is common in Korea because many people do not work and are not actively looking for work (Figure 2.1). This is especially true for young people, with activity rates among 15‑24 year‑olds being almost 20 percentage points below the OECD average (OECD, 2022[1]). The comparatively low participation in the labour market also extends to prime‑aged people, even though to a lesser extent, with activity rates among 25‑54 year‑olds reaching 79.2% in 2022 in Korea against 83.1% in the OECD.

One of the main challenges preventing further increases in employment levels is the deeply enrooted duality of the Korean labour market. While regular employment contracts tend to offer stable employment, competitive salaries and access to social protection, non-standard contracts are far less secure, pay less and are less likely to come with enrolment in social protection programmes. As of May 2023, 43% of workers did not have a regular employment contract, with the biggest groups of non-standard workers being temporary workers (16% of total employment) (Social Statistics Bureau, 2023[2]). Once employed in non-standard work, the chances of moving up to a regular employment contract are slim, including because workplace training is very rare for non-standard workers. The duality of the Korean labour market is closely linked to the distinction between large corporations and the public sector one the one hand, and small and medium-sized enterprises (SMEs) on the other (OECD, 2022[1]). Major conglomerates and the public sector have a high proportion of regular employees who benefit from stable, long-term employment while SMEs tend to rely more heavily on non-standard work in line with their higher sensitivity to the economic cycle. The duality of the labour market creates disincentives to take up employment for many Koreans, especially at the beginning of their careers (see Chapter 4).

In contrast to young and prime‑aged people, labour force participation and employment rates for older age‑groups are high (Figure 2.1). In 2022, 70.3% of Korea’s 55‑64 year‑olds were in the labour force and 68.8% were employed, well above the OECD averages of 65.3% and 62.9%, respectively. These high levels are largely due to late labour market exits which occur, on average, about two years later than in other OECD countries (OECD, 2020[3]). The high employment levels also extend beyond the normal retirement entry age, which is currently age 62 in Korea. In fact, Korea has the highest employment rate among all OECD countries for people aged 65 and above, at almost 40%, far above most other countries. While this remarkably high level contributes to economic growth, it also reflects the precarious situation of many older people in Korea, with high old-age poverty rates and low pension entitlements (OECD, 2021[4]). Furthermore, many of the jobs for older people are subsidised positions rather than jobs in the open labour market (see Chapter 4).

Figure 2.1. Unemployment is low, but inactivity among young people is higher than among other age groups

Share of the population according to their labour market status, by age group, 2022

Note: OECD is a weighted average.

Source: OECD calculations based on OECD dataset: LFS by sex and age – indicators, http://stats.oecd.org//Index.aspx?QueryId=118627.

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2.2.2. Rapid population ageing and the career prospects of mothers are challenges confronting the Korean labour market

In the coming years, it will be important to prevent labour shortages from building up. Already today, labour shortages pose a challenge for SMEs, hindering their ability to recruit qualified workers. (OECD, 2022[1]). These shortages are likely to intensify, as Korea is predicted to age drastically in the next few decades, with the share of people aged 70 and over jumping from 12% in 2023 to 20% within 10 years and almost 30% by 2040 according to the latest projections. Meanwhile, Korea is on track to lose one‑fifth of its working-age population (15‑64 years) over the next 15 years alone (United Nations, 2023[5]). In this context, it will be important to boost employment rates of younger and prime‑aged cohorts, where employment levels lag behind those of other countries.

One particularly pressing challenge in the Korean labour market relates to making a professional career compatible with family life. Despite efforts to address the issue, having a child is still associated with a significant and long-lasting drop in earnings prospects for mothers, thereby confronting them with the choice between having a family and having a good career (Choi, Shin and Ro, 2022[6]). At the same time, Korea is faced with record low fertility levels, at 0.72 children/woman in 2023, which is the lowest fertility rate ever recorded in the world. Eliminating the “motherhood penalty” in career prospects and enabling a smooth return to work after maternity leave are essential objectives, which would contribute to reducing the very large gender gap in employment in Korea (17 percentage points among 15‑64 year‑olds in 2022, against a median1 of 7 percentage points in OECD countries) and help increase fertility levels.

2.3. Active labour market policies in Korea today

Faced with the labour market challenges outlined above, Korea requires a well-tailored mix of employment policies. Recognising the important role of ALMPs in this context, the Employment Policy Council, which is chaired by the Minister of Employment and Labour and takes decisions on employment policy plans, considers that reinforcing ALMPs in Korea, and in particular employment services, is “urgently needed” (Employment Policy Council, 2023[7]).

2.3.1. ALMP spending has grown and focuses on direct job creation

Historically, Korea spent very little on active and passive labour market policies. While expenditures on both ALMPs and passive labour market policies (PLMPs) had been increasing over the years, they remained relatively low compared to other countries until the onset of the COVID‑19 pandemic. In 2019, spending on ALMPs (relative to GDP) was 47% lower than on average in the OECD, and spending on PLMPs about 30% lower. The limited expenditure on ALMPs and PLMPs was due to low unemployment rates, but also to the fact that many ALMPs were less widely available than in other OECD countries and that PLMPs cover only parts of the unemployed (OECD, 2023[8]).

Due to strong increases in spending since 2020, mostly on employment incentives and direct job creation programmes, Korea’s expenditures on ALMPs are now well above the OECD average. In 2021, Korea used 0.6% of its GDP for ALMPs when excluding employment maintenance incentives to abstract from COVID‑19 specific measures (and 0.68% when including maintenance incentives), up from 0.36% in 2019, against 0.45% in the OECD (0.63% in the OECD when including maintenance incentives). According to this metrics, Korea is now among the countries that devote a relatively large shares of their GDP to ALMPs, above countries like Germany and Switzerland that used to spend much more on ALMPs than Korea. This increase in spending mirrors Korea’s efforts to use ALMPs more widely and more systematically than in the past as tools to address labour market challenges, especially for vulnerable groups facing labour market barriers.

The composition of ALMPs differs markedly between Korea and other OECD countries (Figure 2.2, Panel A). In 2021, Korea spent less than many other countries on sheltered and supported employment and rehabilitation (0.04% of GDP in Korea against 0.09% in the OECD) as well as training (0.09% against 0.11%), while it spent more on other types of ALMPs Low spending on training is a particular issue, as training programmes often prove to be effective policy tools to foster employment outcomes in the medium and long run (Card, Kluve and Weber, 2017[9]). What is more, the fit between the content of training courses and jobseekers’ needs is sometimes weak in Korea (Employment Policy Council, 2023[7]). That is, only few jobseekers receive training in Korea, and for those who do, there is a chance that they do not get the training they really need.

Against this backdrop, Korea should consider the option to use a larger proportion of its ALMP expenditures on training and ensure that the training programmes that are offered align with the needs of participants. The experience of other countries can provide valuable insights on that matter as some other OECD countries have made the choice to focus their ALMP basket to a large extent on training programmes, aiming to take advantage of the promising results they can achieve (see Box 2.1 for Finland as an example). Going forward, Korea could build on these experiences to determine whether and how to extend the use of training programmes in line with the needs of jobseekers and people at risk of unemployment.

Conversely, Korea’s expenditure on direct job creation is very high (Figure 2.2, Panel B). In 2021, Korea used 30% of its expenditure on ALMPs for direct job creation programmes (0.18% of GDP was spent on direct job creation programmes while total ALMP spending excluding job maintenance incentives was 0.6% of GDP), against 9% on average in the OECD, leaving limited spending for other types of ALMPs. Only Greece, Ireland, Chile and Hungary spend, relatively speaking, more, while almost half (43%) of other OECD countries do not fund direct job creation programmes at all any longer, as the impact of such programmes on employment outcomes is found to be limited or even negative in many circumstances (Card, Kluve and Weber, 2017[9]).

Figure 2.2. Direct job creation is much more common in Korea than in other OECD countries

Spending on different types of ALMPs and role of direct job creation, 2021

ALMP: Active labour market policies; PES: Public employment service.

Note: OECD is an unweighted average of the 34 countries shown. Employment incentives exclude category 4.2 (Employment maintenance incentives), to remove as much as possible measures that are specific to COVID‑19. Data refer to 2020 for Italy.

Source: OECD dataset: Public expenditure and participant stocks on LMP, http://stats.oecd.org//Index.aspx?QueryId=28935.

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Box 2.1. Extensive use of training programmes in Finland to upskill jobseekers

Finland makes extensive use of training programmes to upskill jobseekers and equip them with the competences to secure high-quality employment. In 2020, the country spent more than half (51%) of its ALMP expenditures (categories 2‑7) on training measures, making it one of the OECD countries that focuses most on training (OECD, 2023[10]). Korea could build on the insights from Finland’s rich offer of training programmes to consider the extension of the types of training that are currently available in Korea.

The two most common types of training programmes in Finland are labour market training and self-motivated training. While the former are short-term training programmes, typically with a direct link to skill needs in the local labour market, the latter allow for in-depth long-term training, mostly as degree studies in the regular education system, and simultaneously receiving unemployment benefits for up to two years, facilitating more profound career changes (OECD, 2023[11]). Offering both types of programmes, Finland builds a comprehensive training ecosystem that caters to a large spectrum of learning needs. In both cases, jobseekers continue to receive unemployment benefits during the training periods.

The offer of labour market training programmes is guided by forecasts on local labour market needs, aiming to ensure that the programmes provide the skills that are most needed by employers. These forecasts are produced by regional development centres (so-called “Centres for Economic Development, Transport and the Environment), which co‑operate with other local stakeholders to make the forecasts as accurate as possible. They produce occupational barometers which identify occupations with risks of labour market shortages, and use these insights to help the PES plan labour market training. For self-motivated training, such guidance is currently not in place, but jobseekers are only admitted to self-motivated training if the PES deems the course content advantageous for their prospects in the labour market (OECD, 2023[11]).

As of 2022, there were on average of close to 20 000 participants in labour market training, and 30 000 in self-motivated training at any point in time, making training programmes the most widespread ALMP in terms of participants in Finland. Jobseekers are encouraged to initiate the applicate process for training themselves, even though their participation has to be validated by the PES.

Both types of programmes have proven to contribute to better labour market outcomes. They both have positive long-term effects on employment, especially for older job seekers and women, and can also have some beneficial effects on labour mobility across occupations (OECD, 2023[11]).

If Korea chose to pivot its ALMP offer towards a greater emphasis on training, drawing inspiration from countries such as Finland and others with strong investments in training programmes could prove beneficial. The example of Finland can provide valuable insights into effects of prioritising training within ALMPs to address specific skill gaps and enhance the employability of the workforce.

Source: OECD (2023[10]), “Labour market programmes: expenditure and participants (Edition 2023)”, OECD Employment and Labour Market Statistics (database), https://doi.org/10.1787/d5116688-en; OECD (2023[11]), Evaluation of Active Labour Market Policies in Finland, https://doi.org/10.1787/115b186e-en.

One particularity of direct job creation programmes in Korea is that they are largely targeted to older people, often above the normal retirement age of 62 years (see Chapter 4). The so-called “Support for Senior Employment and Social” programmes (노인일자리 및 사회활동 지원), which are typically open to people aged 60+ or 65+, account for about 90% of participants in direct job creation programmes. In 2019, almost 677 000 elderly people took part in this type of programmes, out of a total of 11.4 million Koreans aged 60 and over and comparing to a total of just above 766 000 participants in any type of direct job creation programme.

The widespread use of these programmes to connect people just below or over retirement age is an unusual approach in OECD countries (see Chapter 4). It can be viewed as a way of mobilising older workers against the backdrop of very rapid population ageing, but they are also in place because many older people have no or low pensions and face the risk of old-age poverty if they do not work (OECD, 2021[4]). In contrast to programmes targeted at younger jobseekers, the primary objective of direct job creation programmes for people in retirement age is not to prepare them for an unsubsidised position in the private labour market, but rather to secure old-age income while enhancing an active retirement.

Many types of positions exist under direct job creation programmes for older people, ranging from jobs promoting the public interest of the local community to security guards and food manufacturing (MOHW, 2023[12]). Positions labelled as “public interest activities” or “social service activities” are usually open to pensioners aged 65 and older, while placements in “business type activities” can be made from age 60.

2.3.2. Countries with diversified ALMP offers could inspire Korea

Other OECD countries have chosen to rely less heavily on direct job creation programmes than Korea, and to channel more funding to other types of ALMPs. One country that has considerably diversified the composition of its ALMP offer, and which could provide important insights for Korea, is Estonia. While Estonia had a very limited set of ALMPs in the past, with only five programmes in 2005, it has now a very varied ALMP basket with programmes tailored to the needs of many different types of jobseekers (OECD, 2021[13]). The set of ALMPs that were introduced over the past years put a specific focus on:

• Helping people with health problems, including through work-related rehabilitation, sheltered employment and peer-counselling.

• Training measures for low-skilled workers, as well as training tailored to the needs of employers whose workforce lacks skills.

• More intensive measures in economically weak regions.

By contrast, Estonia ended programmes that did not perform as expected, especially direct work creation programmes, as well as some other ALMPs with very low take‑up. In doing so, Estonia aimed to adjust its ALMPs flexibly to labour market needs, taking account of rigorous evidence on what types of programmes work, and for whom.

Korea could benefit from adopting a more diversified approach to ALMPs, moving away from a strong focus on direct job creation to a more balanced ALMP offer, e.g. inspired by Estonia’s experience, with a view to increase the effectiveness of its ALMPs. Such a transition would have to be based on evidence on jobseekers’ needs and the effectiveness of different types of programmes in Korea. This would entail regularly evaluating programme outcomes and taking stock of the views of different types of stakeholders on what kind of programmes are needed most in Korea. A more diversified approach to ALMPs would help ensure that Korea prioritises the ALMPs that have proven to work well and that ALMPs addressing many different types of labour market barriers are available.

2.4. Key institutions involved in the provision of active labour market policies

A variety of stakeholders are involved in implementing ALMPs and associated services like health and social services, leading to a comparatively intricate system of service provision. This section first gives an overview of the key institutions involved in the provision of ALMPs in Korea and then discusses the ALMP system in Korea in terms of centralisation and fragmentation. The section should be seen in conjunction with Chapter 3, which provides a more in-depth analysis of the structure and functioning of Employment Centres and Employment Welfare Plus Centres.

2.4.1. Several key institutions are involved in the provision of active labour market policies in Korea

Korea’s Ministry of Employment and Labour (MOEL) holds central competence for designing and organising employment policy. The National Government Organisation Act grants it responsibility regarding overall labour market policies, employment insurance, decent working conditions, vocational training, and other labour market related topics (Government of Korea, 2020[14]). As the leading central institution on labour market related topics, MOEL is in charge of all employment related policies, including employment policies that overlap with working areas of other Ministries, and has the competence to organise co‑operation practices on employment issues between all relevant institutions, such as different Ministries, regional governments and the private sector (ILO, 2021[15]).

MOEL is split into different offices and bureaus, covering all aspects of employment policy (Figure 2.3). Several offices and bureaus are directly responsible for ALMPs, encompassing the design of ALMPs and the co‑ordination of their delivery. MOEL’s Employment Policy Office (EPO) centrally organises public employment services, and within the EPO, the Employment Services Policy Bureau specifically oversees ALMPs and employment insurance policies. (MOEL, 2021[16]). Furthermore, the Inclusive Employment Policy Bureau and the Youth Employment bureau are in charge of employment services for groups with labour market vulnerabilities, e.g. older people, people with disabilities, women with career breaks and young people. In addition, the Vocational Skills Policy Bureau is another ALMP-related department, which is in charge of skills and training-related policies.

Figure 2.3. The Ministry of Employment and Labour covers all fields of employment policy

Simplified organisation chart of the Ministry of Employment and Labour (MOEL)

Note: Simplified and partial version of MOEL’s organisation chart.

Source: Ministry of Employment and Labour, www.moel.go.kr/english/about/organisation.do.

As Korea’s Public Employment Service (PES), Employment Centres are the key institutions implementing most ALMPs on behalf of the MOEL (Chapter 3). Employment Centres are directly attached to MOEL’s six regional offices (hierarchically higher) and 42 local or branch offices, meaning that they deliver ALMPs in line with national strategies as they are centrally managed and supervised by MOEL. As a result, Employment Centres have a relatively low degree of autonomy vis-à-vis the central government compared to other countries (Lauringson and Lüske, 2021[17]). While Employment Centres can provide input regarding many central aspects of ALMP provision, actual decisions on these topics are not taken at PES level, but rather by MOEL. This applies for example to the budget for ALMPs, the daily implementation of ALMPs and the co‑ordination with other stakeholders (Lauringson and Lüske, 2021[17]).

The main ALMPs delivered by Employment Centres include employment support (e.g. counselling), training and placement into subsidised employment. Regarding direct job creation programmes, front-line staff at Employment Centres familiarise jobseekers with job programmes posted on the employment information portal WorkNet and offer recruiting services under the Corporate Leap Guarantee Package. (MOEL, 2020[18]). While Employment Centres provide services to jobseekers in general, irrespective of their exact background, other providers (e.g. private providers, municipalities) of ALMPs usually focus on groups with specific characteristics, e.g. in terms of age or women with career breaks.

Since 2014, many Employment Centres have been extended to become Employment Welfare Plus Centres, which are one stop-shops offering employment service, social services and microfinance support (ILO, 2021[15]). In practice, Employment Welfare Plus Centres are Employment Centres which host in addition a small number of staff from other institutions, such as welfare service personnel of local governments or social workers from non-profit organisations (see Chapter 3). The main objective of Employment Welfare Plus Centres is to provide integrated services, with a view to overcome gaps in service provision for people who need both employment and social services, and enhance the efficiency of service provision. The number of Employment Welfare Plus Centres has grown very markedly over the last years, from 10 in 2014 to over 100 in 2021. Today, the majority of Employment Centres are hosted in Employment Welfare Plus Centres.

MOEL outsources the delivery of some ALMPs to private providers rather than implementing them via Employment Centres. In total, MOEL outsources ALMPs under 11 employment programmes to private providers, in cases where the expertise of the private sector is particularly beneficial, or when service provision exceeds the capacity of Employment Centres. The most important employment programmes which MOEL outsources to private providers are the following:

• National Employment Support Programme. Under this programme, jobseekers with vulnerabilities who do not receive any benefits from Employment insurance or the Basic Livelihood Security Programme, can be eligible for an allowance and tailored employment support, such as training, counselling, and job search support (OECD, 2022[1]) As of 2023, 492 private providers provide customised employment support services under this programme to jobseekers who are either below or above certain age limits, while Employment Centres are in charge of prime‑age jobseekers.

• Capacity Building Programme for Jobseekers. As of 2023, 69 private providers offer group counselling and special lectures for jobseekers under this programme.

• Mental Stability Support Programme. This programme supports jobseekers in stress management and mental health, aiming to help jobseekers overcome stress caused by unemployment and gain mental stability. As of 2023, 66 private providers offer services under this programme.

Some programmes for specific groups of jobseekers are outsourced to non-governmental organisations (NGOs), non-profit organisations (NPOs), business associations and trade unions. All of these organisations must be designated and entrusted by MOEL (and possibly further ministries) to carry out their work. Examples of programmes that are fully outsourced to such organisations are “Tomorrow Job Centres for Middle‑aged People” and “New Job Centres for Women”. These centres often dispatch some staff members to Employment Welfare Plus Centres, making it easier for jobseekers to connect with the centres. In the case of “Tomorrow Job Centres for Middle‑aged People”, jobseekers aged 40 and above receive employment support tailored to the situation of older jobseekers, including re‑employment and start-up support for people approaching retirement age, and help with life‑planning, in 31 locations throughout the country. Most of the organisations implementing these centres are associations (e.g. small and medium business associations), Chambers of Commerce, and Korea Labor and Employment Service (MOEL, 2023[19]). As for “New Job Centres for Women”, they aim to address the labour market difficulties faced by many women by providing a wide range of support, including career interruption prevention programmes and training. In contrast to other programmes, these centres are managed and supervised by the Ministry of Gender Equality and Family, rather than MOEL.

Municipalities/local governments deliver some ALMPs in addition to the AMLPs provided by Employment Centres, private providers and other public providers. While Employment Centres implement most ALMPs, municipalities invest increasingly in ALMPs for disadvantage groups, in many cases direct job creation programmes, and contribute to implementing job creation programmes designed by the central government. (OECD, 2014[20]) The ALMPs implemented by local governments aim to take specific account of the local labour market context. To this end, local governments develop employment plans tailored to the characteristics of each region and industry, and offer ALMPs in accordance with these plans. In many cases, municipality/local government staff offer their services in Employment Welfare Plus Centres. ALMPs implemented by local governments can encompass different ALMP categories, ranging from direct job creation to training.

The Korea Employment Information Service (KEIS) is a government agency that is connected to MOEL and is responsible for collecting, analysing, and disseminating labour market related information and statistics, as well as developing and maintaining digital infrastructure for Employment Centres and MOEL (see Chapter 5). It was established to support policy making by providing accurate and up-to-date information about employment, job trends, and other labour-related data. As such, KEIS plays a key role in carrying out research on ALMPs. It contributes to the performance management of Employment Centres and other ALMP providers, producing the annual “Assessment of Employment Service Quality Indicators” for all Employment Centres and assessing private providers. KEIS evaluates the effectiveness of labour market services and programmes, and provides capacity building, including to private ALMP providers.

2.4.2. The organisational set-up of ALMP provision in Korea ensures streamlined and equitable access to support

Korea’s ALMP system is strongly centralised. Employment Centres are directly managed and supervised by MOEL, ensuring full alignment between ALMP provision and broader national employment policies. Employment Centres implement ALMPs according to MOEL’s guidance, and MOEL allocates budgets to Employment Centres throughout the country and decides on budget for individual programmes. Compared to other countries, the high degree of centralisation implies that the quality of services provided by Employment Centres can be guaranteed evenly across regions while the level of autonomy of Employment Centres vis-à-vis the national government is low (Lauringson and Lüske, 2021[17]).

Decentralised systems and centralised systems both possess their own advantages. Decentralised systems tend to be better positioned to adapt to local labour market conditions, which can lead to the provision of ALMPs that are more aligned with local needs (Lauringson and Lüske, 2021[17]). At the same time though, decentralised systems require an excellent accountability system to work effectively, and such system has proved difficult to implement in many OECD countries. Denmark is an example of a country where decentralisation has been comparatively successful, but also led to a relatively costly PES system. In contrast to most other countries, ALMPs in Denmark are implemented by job centres that are managed by municipalities. Municipalities design ALMPs, set operational processes and are in charge of ensuring the delivery of ALMPs, compliant with higher-level ALMP details set in the national legislation. This high degree of autonomy allows to adjust ALMPs to local needs and adapt them flexibly. One essential factor for the comparatively good performance of employment services in Denmark is their very strong accountability system, and a centralised platform for sharing good practices (OECD, 2021[21]). However, Denmark has recently set up an expert group to re‑organise the ALMP system and reduce its expenditures, which might entail the closure of local employment offices and a move to a more centralised system (Beskæftigelsesministeriet, 2023[22]). Many other decentralised PES systems have been less successful in delivering effective and accessible employment services. For example, Italy has been struggling in setting up an adequate accountability and co‑ordination mechanisms in their decentralised system, making ALMPs not sufficiently accessible across the country (OECD, 2019[23]).

In contrast, centralised systems offer advantages in ensuring that ALMPs are well integrated with broader national labour market strategies, leading to a more cohesive policy framework. In addition, a centralised approach facilitates the implementation of high-quality services across all regions, thus promoting equitable access to resources and support throughout the country. This allows for streamlined polices, efficient allocation of resources and reduces disparities in service quality and availability across the country. Many OECD countries have been able to put in place centralised PES systems that have been performing well to deliver effective and efficient support to jobseekers and employers, see e.g. Estonia (OECD, 2021[13]), Germany (OECD, 2021[24]), Iceland (OECD, 2021[25]), Lithuania (OECD, 2022[26]) and Slovenia (OECD, 2021[27]). Furthermore, the partial devolution of responsibilities to local authorities in Germany in 2012 has been evaluated to have been decreased the effectiveness of support to jobseekers, reduced job placements by about 10% and shifted the expenditures from local to national level (Mergele and Weber, 2020[28]).

Korea should ensure that it continues to benefit from the advantages of its centralised system while ensuring sufficient bottom-up insights and flexibility in ALMP implementation. To this end, Korea should ensure the national strategy on ALMP provision and national policies take sufficient account of regional specificities to allow flexibility for tailored ALMPs aligning with local needs. A stronger focus on bottom-up approaches would allow to strengthen existing channels to integrate feedback, insights, and needs from local communities, organisations, and individuals.

2.4.3. A better co‑ordination between stakeholders could avoid gaps and overlaps in service provision

Many different institutions are directly or indirectly involved in the provision of ALMPs in Korea, making the system intricate and complex, leading to a relatively fragmented system. In recent years, stakeholders have been increasing their co‑operation, most notably through the introduction and expansion of Employment Welfare Plus Centres (see Chapter 3). Nevertheless, there remains a risk of overlaps, redundancies and gaps between the services. Service segmentation, with different government institutions operating employment and social services, has been identified as a major impediment to a more efficient service delivery in Korea (Kil, 2017[29]). This is especially the case as the service linkage between different types of services in Employment Welfare Plus Centres is sometimes weak (Employment Policy Council, 2023[7]).

Although staff from different institutions is present at the same location in Employment Welfare Plus Centres, the functional integration of the services provided by the different institutions tends to be limited as staff management, budget, and evaluation systems are largely operated separately for each institution. In practice, the degree of linkage between services depends on the co‑operation between stakeholders, especially between the Employment Centre and municipalities, and varies for each local centre.

In addition, there is a lack of knowledge of the exact overlaps between services in the ALMP and social service sectors, as most research focuses on parts of the systems rather than at all services holistically (Kil, 2017[29]). It will be important to fill this lack of knowledge and take stock of the existing gaps and overlaps in service provision by conducting comprehensive analyses on that matter. Such research would require the co‑operation between Employment Welfare Plus Centre staff, researchers, MOEL, different other Ministries, local municipalities, NGOs and possibly jobseekers, and would rely on detailed data on all available services. While requiring resources, such research is necessary to develop a more integrated and efficient service delivery system.

Many other OECD countries, too, are faced with challenges related to co‑ordinating and streamlining ALMPs from different service providers as well as health and social services. In this context, France is currently in the process of re‑organising its PES, aiming to ensure that services are provided holistically to jobseekers (Box 2.2). Some aspects of the French reform, including efforts to improve the co‑ordination between organisations, can be helpful examples for Korea.

Box 2.2. France: Reorganising the PES to provide holistic support and achieve full employment

An extensive reform of France’s PES came into force in January 2024 aiming to reinforce co‑operation between service providers

France implemented a major reform of its public employment service, with the objective of contributing to achieving full employment. While unemployment levels are at their lowest in 40 years and labour shortages have started to build up, a large pool of people remains entirely disconnected from the labour market. For example, only one‑third of social assistance (“Revenu de solidarité active”, RSA) beneficiaries find employment within seven years after entering social assistance (Gouvernement de la République française, 2023[30]).

Against this backdrop, the newly introduced reform seeks to improve the scope and efficiency of the public employment service. Following extensive consultations with the main stakeholders, the reform, which just renamed the PES “France Travail” from “Pôle Emploi”, is structured around four main axes (Ministère du Travail, 2023[31]; Gouvernement de la République française, 2023[30]):

1. Improving the support to unemployed and inactive people

• Improving outreach to people in need of support.

  • Implement automatic registration with the PES for all social assistance beneficiaries. Currently, only 40% of RSA beneficiaries are registered with the PES.

  • Introduce proactive and informal outreach activities (e.g. outreach at local events etc).

• Accelerating referrals to the institution that is best placed to help.

  • Harmonise referral criteria across organisations.

  • Reduce delays in referrals.

• Organising jobseeker support based on a formalised commitment between jobseekers and the PES

  • Establish “contracts” between jobseekers and the PES (or other institutions), formalising a jobseeker’s rights and duties.

  • Provide intensive support when needed, especially for social assistance recipients.

• Overhauling control mechanisms and sanctioning.

  • Introduce a more progressive way of monitoring and sanctioning.

  • In case jobseekers do not comply with their commitments, social assistance payments can be suspended, with the option to make the payments later, when all conditions are fulfilled. During suspension, activation measures continue.

• Extending training possibilities.

  • Develop more training opportunities for jobseekers to acquire basic skills and competences.

  • Tailor training to the needs of companies.

  • Make training opportunities readily available for groups with specific labour market barriers.

  • Strengthen the focus on training programmes preparing for job opportunities in sectors with labour market shortages.

2. Strengthening co‑ordination between different institutions

• Creating a well-co‑ordinated network of ALMP and support providers, including the central government, regions, municipalities, further public institutions and private stakeholders.

  • The PES (“France Travail”) will be tasked with organising the co‑ordination and co‑operation among institutions.

  • Improve digital systems to allow data sharing across organisations.

  • Align work procedures across institutions.

• Modernising the governance of the support system.

  • Introduce a new “national committee France Travail”, headed by the Minister of Employment, to set strategic objectives.

  • Further committees will exist at the regional level (“regional committee France Travail”), at the level of départements, and at the local level.

  • Clearly define the tasks and responsibilities of each stakeholder. Stakeholders commit to certain co‑operation principles by signing a “France Travail charter”.

3. Supporting people with disabilities

• Introducing a new support pathway for people with disabilities.

  • Provide people with disabilities to make short internships in different types of professional environments to identify the right type of work environment for them (e.g. standard firm; firm specialised on staff with disabilities; medical and social centres offering professional activities for people with disabilities).

4. Supporting parents with young children

• Attributing responsibility of organising sufficient childcare to municipalities.

• Creating 200 000 new childcare places by 2030 to reduce the barriers to employment for parents.

• Establishing an “early childhood” point in all cities with more than 10 000 inhabitants.

  • provide information to parents looking for childcare.

  • reduce formality requirements to access childcare.

Source: Gouvernement de la République française (2023[30]), Objectif Plein Emploi – Présentation du Projet de Loi Pour le Plein Emploi; Ministère du Travail (2023[31]), France Travail, https://travail-emploi.gouv.fr/emploi-et-insertion/france-travail/.

2.5. Monitoring and evaluating active labour market policies

In recent years, Korea has put in place a framework of quantitative and qualitative monitoring of ALMPs. According to Korean legislation, the government is required to take measures to foster the effectiveness of the employment programmes that it funds, including by identifying overlapping programmes, evaluating programmes and presenting opinions on potential improvements (Government of Korea, 2009[32]). Therefore, most government-funded job programmes undergo a monitoring process, which enables policy makers to identify need for change and adjust ALMPs accordingly. In 2023, 222 state‑subsidised programmes were monitored, out of a total of 246 subsidised programmes. KEIS plays a key role in the assessments, taking the lead in producing relevant quantitative indicators. In addition, in 2021, the Korean Government set up a Job Programme Evaluation Committee consisting of internal and external experts to ensure that the monitoring exercise is of high quality, and introduced the Employment Programmes Analysis System (EPAS), which allows collecting information on ALMP participants and linking data on programme participants with employment insurance data.

The monitoring of ALMPs follows a multi-step process (Figure 2.1). Every autumn, expert groups conduct on-site monitoring to gather first-hand information and observations directly from the ground. In parallel, satisfaction surveys are submitted to programme participants, aiming to get in-depth feedback on the perceived usefulness of the programmes in improving labour market outcomes.

Following this, in the first months of the new year, quantitative and qualitative assessments of the programmes take place. More specifically, for the quantitative assessment, detailed information on participants is collected (only for participants who consent that their personal information is used), including e.g. for how long they have been on government support. This information, which is available via EPAS, stems either directly from the central government department in charge of the programme or is retrieved by linking various systems, such as HRD-Net (Human Resources Development Network, a platform to support training provision) and WorkNet (the main platform to support service provision to jobseekers and employers). The information is then linked within EPAS to other administrative data to calculate specific outcome indicators. A wide range of outcome indicators can be calculated, depending on the objectives of the specific programme, such as the employment rate after six months, successful completion rates of training or employment stability indicators (KEIS, 2012[33]).

The qualitative assessment complements the quantitative part of the monitoring by condensing all information gathered via the on-site monitoring visits and satisfaction surveys, as well as feedback stemming from self-assessment reports by the government departments implementing the ALMPs. The qualitative assessment is conducted by the Job Programme Evaluation Committee, which is composed of 4‑5 external experts for each programme type, and holds sessions with relevant government departments to understand the details of the programmes.

Based on the outcomes of both the qualitative and the quantitative monitoring, each programme receives one of four grades: 1) Excellent; 2) Good; 3) Improvements Required; 4) Budget Cuts. The final grades are awarded in May each year and influence how much funding the central government allocates for a specific programme in the following year. After the evaluation process, the government establishes a plan to raise the effectiveness of government-funded programmes, comprising analyses of job programme performance, an examination of the advancement of previous reform plans, and future reform needs, including changes to low-performing programmes and the elimination of overlaps between programmes.

Figure 2.4. Programme evaluations follow a well-defined process

Programme evaluation process in 2022/23

Source: Ministry of Employment and Labor (MOEL).

While monitoring is systematic, consisting of on-site visits, satisfaction surveys, quantitative assessments and qualitative assessments, more in-depth evaluations, especially counterfactual impact evaluations (CIEs), are less common. The rich administrative data, which is available via EPAS, the continuous efforts to exchange data between registers for data-driven ALMP design and advancements in digital capacity (see Chapter 5) could be harnessed for more regular CIEs of ALMPs. The OECD has supported several countries in building their analytical and technical capacity to evaluate ALMPs, see OECD (2024[34]; 2020[35]). Such evaluations bear ripe opportunities to ensure that the policy mix is effective and cost-effective, complementing the insights gained through monitoring. In particular, they allow to estimate the net effect of participation in a specific programme, i.e. to what extent labour market outcomes are the consequence of participation in an ALMP, and usually include evaluations of short-term, medium-term and possibly long-term impacts of ALMPs, rather than focusing on outcomes a few months after programme participation only.

Korea should build the capacity in KEIS to conduct CIEs and consider channelling additional funds for this purpose. Some OECD countries have taken major steps to enhance their ALMP monitoring and evaluations frameworks, and support ALMP monitoring with rigorous and systematic CIEs, including via randomised controlled trials when feasible, which is considered the gold standard for CIEs. For comprehensive inputs for evidence‑informed policy making, evaluation frameworks need to additionally include other types of evaluations, such as process evaluations and cost-benefit analyses (OECD, 2020[35]).

For instance, Canada has entirely revamped its ALMP evaluation system to carry out high-quality evaluations in a cost-effective way in-house (Box 2.3) (OECD, 2022[36]). An opposite approach has been taken in Finland, where CIEs of ALMPs are contracted out for objectivity reasons, while the labour authorities have the analytical capacity to successfully outsource CIEs and conduct other types of evaluations (OECD, 2023[11]).

Digital advancements can be harnessed in Korea to conduct systematic CIEs efficiently. For example, Germany introduced a system called “TrEffeR” (short for “Treatment Effects and Prediction”), enabling quasi‑automatic CIEs of ALMPs (European Commission, 2017[37]). TrEffeR conducts a comprehensive CIE of employment outcomes for participants in ALMPs by applying a “matching” method, which is one of the most widely used methods to conduct CIEs of ALMPs (OECD, 2020[35]). A control group, consisting of individuals similar to the participants but who did not engage in the ALMP, is established as “statistical twins” to estimate the effects. This matching process involves numerous criteria such as location, unemployment and benefit status, age, gender, as well as other labour market and other socio-demographic aspects. The causal effect of participation is estimated as the difference between labour market outcomes of participants and their matched “statistical twins.” TrEffeR also enables sub-group analyses, estimating effects for specific types of ALMP participants or specific regions. The functioning of TrEffeR relies on rich data on jobseekers, which is systematically collected and stored (OECD, 2022[38]; European Commission, 2017[37]). Overall, the implementation of TrEffeR was inexpensive for Germany, because the IT system, data and human resources it requires were already in place. The insights TrEffeR produces can be used by PES counsellors in their work with clients as well as high-level decision makers to adjust ALMPs in order to ensure their effectiveness. An even further automatised digital tool to evaluate ALMPs has been recently launched in the Estonian PES, see details in Chapter 5.

Box 2.3. Revamping Canada’s evaluation system for active labour market policies

Canada has recently overhauled its way of evaluating ALMPs, aiming to achieve more systematic, more accurate and less costly evaluations (see (OECD, 2022[36]) for more details). This change came in the context of a general tendency in Canada to make wider use of data to inform policy makers on the efficiency of policies.

Previously, evaluations of ALMPs were outsourced to third parties and relied on surveys. For example, surveys were needed to collect information on the income of ALMP participants and non-participants, their socio‑economic details and labour market outcomes. However, outsourcing evaluations was perceived to cause high costs, and the use of survey data bore the risk of making evaluations less accurate and slow.

Therefore, Canada moved gradually towards a system in which ALMPs are evaluated jointly by the federal Ministry – Employment and Social Development Canada (ESDC) – and provinces/territories (except for Quebec) using administrative data. This shift, which was possible due to support within ESDC but also broader support from outside, required significant efforts and investments. For example, parts of ESDC were restructured, allowing the directorate responsible for ALMP evaluations to grow and build internal capacity. Today, three separate teams are involved in the quantitative evaluation of ALMPs: One teams ensures the data preparation; a second team focuses on carrying out the impact evaluations, enabling the use of advanced statistical methods; a third team manages the co‑operation with provinces/territories. Furthermore, ESDC’s data strategy had to be revisited, and major investments were needed to enable evaluations based on high-quality administrative data. Several administrative data sets had to be linked to create a comprehensive and anonymised data based, the Labour Market Program Data Platform (LMPDP), which comprises all information needed for impact evaluations. For example, LMPDP contains information on ALMP eligibility, ALMP participation, employment income, unemployment benefit receipt, social assistance receipt, socio‑economic information, and further relevant data.

ESDC uses the rich data contained in the LMPDP to carry out observational studies (which do not require random assignment to programme participation), using solid and advanced estimation techniques. Instead of analysing solely the effect of individual ALMPs, the studies also allow to evaluate to efficiency and effectiveness of different ALMP packages containing more than one programme. In order to ensure the reliability of the results, the evaluations also include robustness checks and sensitivity analyses. In addition, both internal and external resources are used for quality assurance, allowing to minimise the risk of errors.

ESDC also uses the results of the impact evaluations to carry out cost-benefit analyses.

Source: OECD (2022[36]), Assessing Canada’s System of Impact Evaluation of Active Labour Market Policies, https://doi.org/10.1787/27dfbd5f-en.

2.6. Conclusion

Korea’s labour market is strong, but faces structural challenges, most notably a deeply enrooted segmentation between regular and non-regular employment, difficulties to achieve compatibility between family life and professional life, and a shrinking labour force amid rapid population ageing. Against this backdrop, ALMPs have a key role to play in enhancing the employability of all groups of jobseekers, facilitating the transitions towards better jobs, and preventing labour market shortages.

While Korea has substantially increased its spending on ALMPs since the beginning of the COVID‑19 pandemic, it focuses largely on direct job creation programmes, many of which are targeted towards older jobseekers and people in retirement age. As a result, funding for other types of ALMPs focusing on younger jobseekers is more constrained. The experience of countries with a more diverse mix of ALMPs and a stronger focus on ALMPs other than direct job creation, can provide insights for Korea when designing ALMPs and deciding on budgets for different types of ALMPs in the future, to ensure that the most efficient ALMPs are used and provide support that is in line with labour demand.

The organisation of Korea’s ALMP system involves a variety of stakeholders, making the system intricate. MOEL is the central organisation directing overall employment policy and has direct oversight over Employment Centres that deliver most ALMPs, ensuring streamlined and equitable access to services for jobseekers and employers.

However, numerous other stakeholders implement ALMPs, such as private providers, NGOs and local governments. Most Employment Centres now operate as one‑stop shops (so-called Employment Welfare Plus Centres), integrating staff from other institutions, and the roles of different institutions and the operation of collaborative programmes are co‑ordinated through internal councils such as the Steering Committee of the Employment Welfare Plus Centre. Nevertheless, there can still be overlaps and gaps between ALMPs and related services delivered by different institutions.

Korea has put in place systematic monitoring of ALMPs consisting of qualitative and quantitative elements to assess whether the programmes run smoothly and have an impact. The Korea Employment Information Service (KEIS) holds the leading role in these assessments, which consist of on-site visits, satisfaction surveys and the computation of performance indicators. The systematic monitoring activities need to be complemented with in-depth counterfactual impact evaluations of ALMPs, harnessing the advancements in data availability and digital advancements.

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Note

← 1.  The OECD average is much higher than the median (14 percentage points against 7 percentage points) because it is drawn upwards by a few countries with very wide gender gaps in employment rates.