The Korea Herald


[EDITORIAL] Cash allowances

By 류근하

Published : Aug. 16, 2016 - 07:52

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[THE INVESTOR] Disputes are escalating between the central government and the Seoul Metropolitan Government over the provision of cash allowances to job seekers.

The row was ignited by the city government’s scheme to provide 3,000 young job seekers with 500,000 won ($450) a month for up to six months.

The central government opposed the plan, calling it a typical populist program. It argued that the scheme could not be seen as an employment promotion program as it allowed the recipients to use the allowances for whatever purposes.

Despite strong opposition from the central government, the city government went ahead with its plan, offering the allowances to 2,831 applicants on Aug. 3.

The Ministry of Health and Welfare immediately issued a correction order, urging the city government to take back the paid allowances from the recipients.

Defying the order, the city government is set to take the case to court.

What escalated the dispute was the announcement on Friday by the Ministry of Labor and Employment that it would provide cash allowances to participants in the third stage of its employment service program.

The ministry has been operating the Employment Success Package, a program that offers integrated employment services to youth, people from low-income families and the elderly for a maximum of one year.

The program consists of three stages. In the first step, which lasts three to four weeks, participants receive intensive counseling and establish individual action plans. They are offered participation allowances of up to 250,000 won.

In the second step, participants receive vocational training for up to eight months. During this period, they are paid training allowances of 400,000 won a month for six months.

The third stage, which runs for three months, is for job placement. In this stage, participants are provided recruitment information and are accompanied to interviews by an advice worker. But they receive no cash allowances.

The ministry said it decided to provide 200,000 won a month for three months to the participants in the third stage as they obviously needed money to prepare for job interviews.

It estimates 7.4 billion won would be needed to offer the allowances to some 24,000 job seekers. The money will come from the Youth Hope Fund, a private fund set up to finance projects aimed at creating jobs for young people.

The ministry’s program has proved effective in promoting the employment of vulnerable groups. In 2014, about 64 percent of the participants managed to land a job. Last year, the ratio rose to 79 percent. The number of participants increased to more than 110,000 in the first half of the year.

The ministry stressed that its cash allowances were different from those of the Seoul city government as they would be paid to participants in its employment service program to support their job placement activities.

However, the city government argued that the ministry’s program was not much different from its own and that therefore the central government should withdraw the correction order.

In our opinion, the city government’s program has problems as it cannot be seen as a kind of active labor market program. Cash allowances should be given to job seekers who participate in a well-designed package of active measures. Otherwise, it would be nothing more than a waste of taxpayers’ money. The city government is advised to use its resources to expand the Employment Success Package.