“The new policy will support the long-term employment of SME workers and help attract a fresh batch of laborers into the SME sector,” said Gyeonggi Province Gov. Nam Kyung-pil during a press conference held earlier this year to unveil the measures.

The governor noted that the main goal of the measures is to alleviate the wage gap between SMEs and big companies -- the key reason why young workers shun SME jobs and SME employers fail to retain talent.

According to a recent study by the Korea Small Business Institute, the average pay of SME workers in manufacturing is just 54.9 percent of what their peers in big companies earn.

Among the three packages, the monthly subsidy plan entails provision for up to two years of 300,000 won ($268) directly to 20,000 workers whose monthly wage is 2 million won or less. This is 7.2 million won in total per person, translating to at least a 15 percent increase in salary, Gyeonggi officials explained.

The province will establish a welfare credit point system that enables recipients, numbering 100,000, to collect bonuses worth 800,000 won to 1.2 million won per year, as SME jobs tend to lack in fringe benefits.

In addition, the province plans to introduce a special pension program for SME workers, on top of the existing retirement pension scheme. The 10-year program will have subscribers pay 100,000 won to 300,000 won into the fund every month, which will be matched by the same amount of contribution from the province. Subscribers for this 10-year pension plan are limited at 10,000 who earn less than 2.5 million won per month.

Beneficiaries of these three programs will be selected based on their income level. A worker cannot apply for more than one program.

“These policies will help strengthen the competitiveness of SMEs, which will then lead to new quality jobs for workers. It would create a virtuous circle,” Nam stressed.

Province officials said the three measures are designed to address the crippling factors in the SME employment as much as possible -- low pay, long hours and a lack of employment benefits. Without measures on these factors, a job policy won’t fix the SME job mismatch.

The province will establish a special unit to oversee the program’s successful implementation.

Nam said the new job policy signals a shift in Gyeonggi’s welfare approach from universal welfare to “targeted” welfare. He stressed with the South Korean population greying rapidly and an anticipated hike in welfare demand, universal welfare should be replaced by a more efficient model that can reduce fiscal burden.

The Moon Jae-in administration has been making efforts to invigorate the SME industry by setting up a new ministry dedicated to supporting smaller companies and creating more jobs in July, as part of its five-year policy road map.

The average monthly wage of SME workers stood at 3.23 million won in 2016, or 62.9 percent of 5.13 million won paid to employees working for large enterprises, showed a report by the think tank Korea Small Business Institute.

The ratio of long-term unemployed people to the total jobless in South Korea reached an 18-year high in July, according to Statistics Korea in August.

By Jung Min-kyung (mkjung@heraldcorp.com)