April 5, 2018
On April 5th (Thu.), the Ministry of Employment and Labor (MOEL) designated six areas - Gunsan, Geoje, Tongyeong, Goseong-gun, Jinhae-gu in Changwon and Dong-gu in Ulsan - which are likely to face economic difficulties due to the announcement of corporate restructuring and closure of major local companies, as Employment Crisis Areas. Each area requested for the designation: Gunsan on Mar. 16th, Dong-gu in Ulsan on Mar. 22nd, Geoje, Tongyeong, Goseong-gun and Jinhae-gu in Changwon on Mar. 23rd.
MOEL also decided to extend the period of the designation of the shipbuilding industry as Special Employment Support Industry, which was due to expire at the end of this June, for another six months to Dec. 31st, as requested by the Korea Offshore & Shipbuilding Association on March 23th.
The Ministry's decision comes at a time when the slump in the shipbuilding sector, which has continued since 2016, is casting a shadow across the local economies with many shipbuilding firms. The decision was made considering the fact that with the prospect of gradual improvement in the shipbuilding industry, it would take quite a while for the recent increase in shipbuilding orders to translate into employment growth. It also took account of GM Korea's decision to shut down its Gunsan plant and the possibility of further restructuring at smaller shipbuilders, such as Sungdong Shipbuilding & Marine Engineering Co. Ltd., and STX Offshore & Shipbuilding Co. Ltd.
Designation of Employment Crisis Areas
The designation of the six areas as Employment Crisis Areas (ECA) is the third of such designations in Korea's history after Pyeongtaek as Employment Development Promotion Area in 2009 and Tongyeong as Employment Promotion Special Area in 2013. It is the first time that more than two local areas are designated at once.
The six local areas have been designated as ECAs for the following reasons:
- Geoje, Tongyeong, Goseong-gun and Dong-gu in Ulsan have seen their employment indicators deteriorate due to the prolonged recession in their local shipbuilding industy and are therefore considered to satisfy the quantitative requirements for designation as ECAs.
- On the other hand, Gunsan and Jinhae-gu in Changwon do not satisfy the quantitative requirements which focus mainly on employment indicators. But it is deemed necessary to respond in advance given the possibility of restructuring at GM Korea's Gunsan plant (Gunsan) and STX Offshore & Shipbuilding (Jinhae-gu). This is the first time the Notification on Designation of Employment Crisis Areas (the Notification) amended on March 6th has been applied.
<Criteria for Designation of Employment Crisis Areas (Article 4(1) of the Notification)>
Criterion 1: The employment situation has worsened or is likely to worsen markedly, and the local area shall fit any of the following three types:
The rate of increase or decrease in the number of insured persons covered by employment insurance (insured persons) (referring to the rate calculated based on the number of insured persons during the one-year period immediately preceding the date of application for designation as an Employment Crisis Area (ECA) and the number of insured persons during the previous one-year period) is at least 5%p lower than the national average rate of increase or decrease over the same period.
The average number of insured persons during the one-year period immediately preceding the date of application for designation as an ECA has decreased by at least 5% compared with the figure for the previous one-year period.
The number of new unemployment benefit claimants during the one-year period immediately preceding the date of application for designation as an ECA has increased by at least 20% compared with the figure for the previous one-year period.
Due to the continuing deterioration of the employment situation, the average number of insured persons during the one-year period immediately preceding the date of application for designation as an ECA has decreased by at least 7% compared with the figure for the one-year period three years ago.
Proactive responses are deemed necessary because massive employment adjustment is expected due to announcement of plans to relocate or shut down factories in the local area.
Criterion 2: The local area meets the criterion 1, and the Minister of Employment and Labor deems it necessary to designate the area as an ECA, taking into comprehensive consideration its economic, industrial and employment situations.
Support measures for Employment Crisis Areas
For the six ECAs, the government will implement various support measures to enhance the safety net, expand reemployment and training opportunities and promote employment retention and job creation for workers vulnerable to crises.
1. Easing livelihood burdens
1) If a jobless person in the ECA participates in vocational training, 100% of his/her unemployment benefits will be paid during training even after the end of his/her benefit duration, in accordance with the relevant Enforcement Regulations to be amended by the first half of 2018.
2) The upper limit on loans provided for job-seeking people to cover living expenses during vocational training will be raised from 10 million won to 20 million won per person.
3) The income thresholds* will be relaxed and loan limits** will rise with regard to Livelihood Stabilization Loans for employed people and loans for living expenses for workers whose wages are delayed.
* Income thresholds:
- livelihood stabilization loan: 2.46 million won (2/3 of the median monthly income for a three-person household) → 3.02 million won (2/3 of the median monthly income for a four-person household);
- loan for living expenses for workers whose wages are delayed: 44.20 million won (median annual income for a three-person household) → 54.30 million won (median annual income for a four-person household)
** Loan limits:
- loan for children's school expenses: 5 million won per child attending high school → 7 million won per child attending high school or university;
- loan for living expenses for workers whose wages are delayed: 10 million won→20 million won
2. Expanding reemployment and vocational training opportunities
1) The restrictions (income requirements) on participation in the Employment Success Package Program will be lifted for all job seekers in the ECAs, and they will be exempt from out-of-pocket payments when participating in the second stage training program.
2) Greater access to vocational training will be ensured through exemption for all employed, unemployed and self-employed people from out-of-pocket payments for vocational training (financial support ceiling per person 2 million won → 3 million won); and through an increase in the number of courses one person can take.
3) The Employment Promotion Allowance Program will be expanded to actively assist jobless people in participating in vocational training and engaging in job-search activities: Vocational Skills Development Allowance will increase from 5,800 won to 7,530 won per day, the area covered by Wide-area Job-search Expenses will become 25 km from 50 km, and moving expenses will be supported.
4) Comprehensive Employment Service Center for Retired Workers will be set up in Gunsan to provide various specialized programs in support for the North Jeolla provincial government's regional innovation project.
3. Employment retention through support for employers
1) To help employers in the ECAs retain employment, the government will increase the level and maximum amount of subsidy for temporary shutdown and layoff for employers and ease the eligibility requirements for unpaid leave for employees: 2/3 of temporary shutdown or layoff allowances paid (up to 60,000 won a day) → 9/10 of temporary shutdown or layoff allowances paid (up to 70,000 won a day), and minimum period of unpaid leave required to be at least 3 months → at least 30 days.
2) Support for employers for vocational training will be expanded to help develop human resources and improve corporate competitiveness: as vocational training subsidy, 240% → 300% of insurance premiums paid.
3) Employers will be allowed to postpone paying premiums of employment and industrial accident compensation insurances and penalty levies imposed for failing to meet the obligation to employ people with disabilities. They will also be exempt from fines (30,000 won per insured person, maximum 1 million won) imposed for delays in reporting the establishment of employment insurance relationships.
4. Creation of diverse jobs in the ECAs
1) Local Employment Promotion Subsidies will be paid to employers who move their place of business to or establish a new or additional workplace in an ECA and hire new employees as a result: 1/2 of labor costs (1/3 of labor costs for large companies)
2) Employers in the ECAs will be provided with additional 5 million won in 2+1 Youth Employment Subsidies (9 million won → 14 million won per person per year), and employers who hire unemployed people from the ECAs will be provided with Employment Promotion Subsidy of 7.2 million won a year (currently, the subsidy is provided only for employers who hire disabled people, female household heads or island residents).
3) Youth Centers will be set up in the ECAs (Gunsan and Tongyeong) to provide comprehensive support for the youth including training on overseas employment, business start-up support and consulting services; and the amount of financial support per person will increase by 3 million won (15 million won → 18 million won) to incentivize young people to participate in the K-move schools.,
4) Additional support will be provided for local industry-tailored job creation projects by local governments in the ECAs.
Besides, government-wide support measures, such as to support for suppliers and local micro-enterprises, foster substitute or complementary industries and revitalize local economies, are going to be established and implemented for areas in which restructuring takes place.
Extension of the shipbuilding industry's designation as Special Employment Support Industry
The government designated the shipbuilding industry as Special Employment Support Industry in July 2016 and extended the designation period for one year in July last year. The designation was due to expire on June 30th of this year, but the government decided to extend it for another six months and continue its support until December 31st.
The recovery of the shipbuilding industry has not been as fast as expected, and since earlier this year there have been continuous calls from employers’ and workers’ organizations, local governments and workplaces to extend the designation. On March 16th, the Korea Offshore & Shipbuilding Association made an official request for the extension.
The decision of the re-extension was made after comprehensive consideration of the results of a field survey, the industry and employment trends and prospects in the shipbuilding sector and the possible effects of the termination of the designation. It was expected that small and medium-sized shipbuilders and their suppliers would continue to suffer this year as shipbuilding output is recovering at a sluggish pace, and that employment in the industry would improve only after 2019. So the government concluded that it was necessary to maintain its support for shipbuilding firms and their workers until the end of this year.
As a result of the re-extension, the existing support measures, such as providing preferential subsidies for employment retention and running Hope Centers for workers in the shipbuilding sector, will continue for another six months. In addition, new support measures, such as payment of benefits for extended training, expansion of loans for living expenses and provision of employment promotion subsidies, will be implemented in line with the scope of support for the ECAs.
Employment and Labor Minister Kim Young-joo said, “I hope the designation of the six Employment Crisis Areas and the re-extension of the shipbuilding industry's designation for Special Employment Support will be of practical help to workers and local residents facing a crisis due to restructuring.” She also said, “The government will make every effort to ensure effective operation of the support measures at the field level and actively respond to additional crises through close monitoring of local economic conditions.”