Shifting money to stabilization fund criticizedTopping up the job stabilization fund with general revenues is a bad idea, critics contend, despite the contingency pool running low and some small businesses desperately in need of support.
The move, which has been proposed by the administration, is seen diverting revenue at a time of weak tax takes and as a political move designed to influence votes in the general election.
It is also seen as a cynical attempt to paper over the problems created by President Moon Jae-in’s income-led growth policy.
During the cabinet meeting Wednesday, Prime Minister Lee Nak-yon approved a proposal by the Finance Ministry and the Employment Ministry to divert 98.5 billion won ($902.4 million) to the job stabilization fund, which is running low.
“The job stabilization fund is a government project whose goal is to ease the business management burden on small businesses affected by the increase in minimum wage,” the Finance Ministry said in statement release on Tuesday. “[The job stabilization fund] has contributed to strengthening the job security of workers that receive low wages as well as easing the burden of paying employment insurances.”
The ministries claimed that it is asking for approval on the additional 98.5 billion won because applications submitted by small businesses increased faster than expectations. According to the government, 71.6 percent of businesses have requested government subsidies as companies become more aware of the availability of the support.
It said in 2018 only 68.4 percent of small businesses were aware of the government subsidies, but this year it shot up to 94.8 percent.
The government said the proposed amount assumes that subsidies for 8,000 people are requested in the last two months of the year.
The government subsidy, which was adopted last year, provides 130,000 to 150,000 won per worker per month to businesses with fewer than 30 employees. The subsidy is only given to employees that make 2.1 million won or less a month.
That’s 120 percent of the 1.74 million won monthly minimum wage.
The government initially estimated 2.38 million would apply for the government subsidy. As of this month, 3.29 million had applied, which is 900,000 more than its initial estimates. The request comes as the government fails to collect as much in taxes as it did last year, while the government’s spending has been growing rapidly.
In the first nine months of this year, the government collected 228.1 trillion won in taxes. That’s 2.3 percent less than a year ago. It was the first time that taxes collected in the first nine months fell on year since falling 2.9 percent in 2013.
Spending during the same period increased nearly 12 percent to 386 trillion won.
Through its spokeswoman, the main opposition Liberty Korea Party on Tuesday criticized the government’s reckless spending.
“Every quarter, the Moon Jae-in administration has claimed that the job market situation is improving,” said Jun Hee-kyung, the conservative party spokeswoman. “Yet it is a contradiction to ask for additional funding for the job stabilization subsidy.”
The party also claimed that the additional contingency funding was actually a political ploy in winning votes for next year’s election.
The government will downsize the job stabilization fund by 23 percent next year, when the minimum wage rises 2.87 percent. The minimum wage increased 16.4 percent in 2018 and 10.9 percent in 2019.
The subsidy will be cut to 90,000 and 110,000 won.
BY LEE HO-JEONG [email@example.com]
More in Economy
7 percent of low-income families forced to live in huts and lean-tos
Exports get a positive bounce in first 10 days of July
BOK expected to maintain policy rate at record low
22nd set of real estate cooling measures is released
Pace of lending to households accelerates in June