June 01, 2021 13:49
Korea's unemployment insurance reserves stood at W10 trillion when President Moon Jae-in took office in 2017 but will have been depleted to a deficit of W2.7 trillion by the end of this year (US$1=W1,110). Spending has outpaced money coming in since 2018, resulting in a cumulative loss of W8.2 trillion until last year while another W4.7 trillion deficit is expected this year. Moon's failed experiment of stimulating private consumption by hiking the minimum wage prompted small businesses to lay off workers, which resulted in the unemployment insurance fund running dry.
The government would be lying if it blamed the coronavirus pandemic. The fund started running dry even before that. Last year, the lowest unemployment insurance payout of W1.81 million was higher than the minimum-wage earnings of a non-regular worker putting in 40-hours a week at W1.79 million. It also tapped into the fund for incentive payments for companies to hire young workers and to help businesses cover the shortfall of decreasing working hours. The money for the fund gets taken out of people's wages, and the president treated it like an ATM for his pet policies.
The government also failed to supervise the spending of taxpayers' money properly. Over the last five years, 94,000 people received unemployment insurance payments more than three times, and the amount of money they got totaled W480 billion in 2020 alone, up more than twice over the past three years. In other words, a growing number of people got hooked on payouts and repeated the process by having new employers fire them to become eligible for the handouts. But the government failed to identify such delinquents. The pandemic has only compounded the problem. The fund is in danger of going bankrupt without an infusion from the government.
According to the Board of Audit and Inspection, 27 out of 61 public funds have suffered annual deficits over the last five years, and five more are apparently at risk of bleeding money by 2024. The national health insurance fund, which used to post a surplus each year, ended up in a deficit since 2018 as a result of Moon's expanded coverage of medical expenses. State-run companies suffered a record W545-trillion deficit in 2020, while the wages of their staff grew by W8 trillion. The public is reeling under the wanton spending practices of a populist president.
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