Payouts from Korea's unemployment benefit account exceeded 17 trillion won for the first time last year, while spending from the employment insurance fund topped 20 trillion won for the first time since the COVID-19 pandemic. Concerns are growing that the fund's fiscal capacity is weakening rapidly, as demand for unemployment benefits has risen amid the economic downturn while premium revenue has failed to keep pace.
According to the Ministry of Employment and Labor's "Fiscal Year 2025 Employment Insurance Fund Settlement Report" released Friday, total spending from the fund, combining program costs and fund operating costs, reached 20.9405 trillion won last year. This was a 14.3% increase from 18.3284 trillion won the previous year. It marked the first time spending exceeded 20 trillion won since 2021, when about 21 trillion won was spent as employment stability support was concentrated amid the COVID-19 fallout.
Unemployment benefits drove the spending increase. Last year, spending from the unemployment benefit account reached 17.4833 trillion won, accounting for the bulk of total expenditure. Of this, about 4 trillion won was spending on maternity protection programs such as parental leave. The increase is attributed to a rise in unemployment benefit recipients amid the continued downturn in the manufacturing and construction sectors, as well as increased payments of maternity protection benefits, including maternity leave benefits and parental leave benefits.
By contrast, the growth in fund revenue failed to keep pace with the expansion in spending. Employment insurance fund revenue was 20.3485 trillion won last year. Of this, internal revenue including premiums was 19.7985 trillion won, while transfers from the general account were 550 billion won. As a result, the fund recorded a fiscal deficit of 592 billion won last year, with spending exceeding revenue. The fund posted a deficit for the second consecutive year following 2024.
Fiscal capacity is also shrinking rapidly. As of the end of last year, the employment insurance fund's reserves stood at 7.8003 trillion won, but real reserves, excluding deposits borrowed from the Public Capital Management Fund, amounted to just 79.6 billion won. In effect, the fund continues to be operated largely on borrowed money.
The reserve capacity of the unemployment benefit account also fell far short of the legal standard. The Employment Insurance Act requires reserves equivalent to 1.5 to 2 times annual spending to prepare for events such as mass unemployment. However, the unemployment benefit reserve ratio was found to have remained at around 0.1 times last year.
Experts are concerned that the deteriorating fiscal soundness of employment insurance could lead to structural problems. With the premium revenue base weakening as the number of employed people declines, the fund's burden could grow further if demand for unemployment benefits rises amid the economic slowdown.
Signs of a slowdown are indeed emerging in the labor market. According to the Korea National Bureau of Statistics, the number of employed people aged 15 and older last month was 29.12 million, down 40,000 from the same month a year earlier. It was the first decline in the number of employed people in 17 months.
The government has begun working on measures to improve the system. In November last year, the Ministry of Employment and Labor formed an "Employment Insurance System Improvement Task Force" to review ways to secure the fund's fiscal soundness. Separating the funding source for maternity protection benefits, adjusting the unemployment benefit system, and raising the premium rate are being discussed as options.
"We are continuing discussions in the Employment Insurance System Improvement Task Force," a Ministry of Employment and Labor official said. "We plan to announce related measures as soon as the discussion results are finalized."
