President Moon Jae-in proclaimed a “Korean New Deal” on 22nd April to create jobs in the wake of the coronavirus outbreak.
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He also announced that the government plans to give 1.5 million won ($1,200) to people who lost their jobs but are not covered by employment insurance, which has never been done before.
Preventing layoffs and creating jobs have become the top priority of the government with job losses hitting their highest numbers in a decade.
During the government’s fifth economic emergency council meeting, Moon promised a Korean New Deal.
“New Deal jobs should not be temporary positions but innovative growth projects that will continue through the post-Covid-19 era. The government has to boldly push forward major projects that would create new jobs,” Moon said.
According to Finance Minster Hong Nam-ki, the Korean New Deal projects will be digital, have jobs that do not have much face-to-face contacts and also include small neighborhood public projects.
Big stimulus projects in the past usually involved large-scale infrastructure projects.
The Blue House described its New Deal as setting up a digital infrastructure that also involves big data.
“President Moon emphasized the need for a digital New Deal by giving the example of creating self-diagnosis apps in regard to Covid-19 quarantine,” said Blue House spokesman Kang Min-seok.
Finance Minister Hong said the details of the so-called Korean New Deal projects will be announced after a thorough review in May.
The government plans to invest 10.1 trillion won to create jobs, subsidize companies that maintain employees and to fund a 1.5 million won three-month allowance for people who have lost their jobs but aren’t covered by employment insurance, such as freelancers.
Of the total, 3.6 trillion won will be used to create 550,000 jobs, of which 73 percent or 400,000 will be in the public sector.
The jobs, according to the government, include inputting information into public databases and working on sanitization and environmental protection.
The government will spend 480 billion won subsidizing companies’ payments to workers put on unpaid leave.
Those workers will get 1.5 million won over three months, 500,000 won per month. Some 320,000 workers are expected to benefit.
The government will spend 1.5 trillion won on the allowances for people who have lost their jobs but aren’t covered by employment insurance.
To be eligible, they have to prove that their incomes declined significantly because of Covid-19. The government estimates 930,000 will benefit from those allowances.
To finance the spending, the government plans a 9.3 trillion won supplementary budget, the third supplementary budget proposed by the Moon Jae-in government this year alone and the sixth in total since 2017,
It is the first time in more than half a century that the government has created a third supplementary budget in a single year. The last time was in 1969.
Hong said the government will finance 800 billion won of the 10.1 trillion won in spending through the government’s already allocated funds, which doesn’t need National Assembly approval, while the balance will be covered through the third supplementary budget.
Hong said the third supplementary budget will mostly be financed by new government bonds.
“The latest [10.1 trillion won] measure is equivalent to 40 percent of this year’s job budget of [25.5 trillion won]. It is a bold investment that will support 2.86 million workers, which is equal to 2.5 times of the 1.15 million unemployed in 2019,” Hong said.
The announcement of the third supplementary budget was made after the government submitted its second supplementary budget to the National Assembly on 16th April.
If the second and third supplementary budgets are approved by lawmakers, the total amount of extra budget created this year will amount to 28.6 trillion won, which is equivalent to 5.6 percent of this year’s supersized budget of 512 trillion won.
The government has also decided to spend 75 trillion won to help the private sector stabilize, and hopefully reduce layoffs.
A 40 trillion won industry stabilization fund will be created by the state-own Korea Development Bank (KDB) to ease liquidity crunches.
Key industries are those considered essential to the economy including airlines, shipping, automobiles, energy and telecommunications. The financial support, however, comes with conditions.
Moon said that companies must maintain all employees, cap pay of executives, limit dividend payments and stop stock buybacks.
The government has also decided to add 35 trillion won to the 100 trillion won market stabilization financial program announced in late March.
“People’s lives and the economy can only exist when there are jobs. Protecting jobs is the core project in overcoming the national crisis and the most desperate problem of survival,” Moon said.
According to Statistics Korea, total job losses in March reached a 10-year high. Last month 195,000 jobs were lost, the biggest number since 240,000 in May 2009.
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The number of people on temporary leaves, who are considered to be employed, surged 363.4 percent compared to a year ago to 1.26 million, an all-time record.
(Source: Korea JoongAng Daily)