Crisis declared when 3 of 5 indicators — including employment and unemployment rates — exceed thresholds for 2 consecutive months
Criteria validated against global financial crisis, COVID-19 and 2003 credit card crisis; revised Employment Insurance Act provides legal basis for expanded support
When a nationwide employment shock on the scale of the COVID-19 pandemic or the global financial crisis strikes, the government will use five key indicators — including employment and unemployment rates — to automatically detect the crisis and expand job retention subsidies. The measure is designed to catch early signs of deteriorating employment conditions, prevent mass layoffs and help businesses keep workers on their payrolls.
Specifically, if three or more of the five indicators exceed preset risk thresholds for two consecutive months, the criteria for declaring a nationwide employment crisis will be met. The standard is calibrated to capture the kind of shocks seen during the global financial crisis and the COVID-19 pandemic, and it marks a shift away from the government's previous reliance on discretionary judgment toward a system grounded in objective statistics.
The five indicators and their trigger thresholds were identified in a research report commissioned by the Ministry of Employment and Labor and carried out by the Korea Labor Economics Association, released Sunday.
Five indicators including employment and unemployment rates — crisis triggered when 3 or more exceed thresholds for 2 straight months
The five core indicators used to assess a nationwide employment crisis are: the employment rate, a three-month moving average of the employment rate, the number of job seekers receiving unemployment benefits (including daily workers), the number of insured workers who lost coverage due to business-related reasons, and the unemployment rate.
The indicators are designed to give a comprehensive picture of labor market deterioration — capturing not only the overall decline in employment conditions but also rising job losses and signs that businesses are cutting their workforces. Rather than declaring a crisis based solely on a rise in unemployment or a drop in the number of employed workers, the system looks at movements across multiple indicators simultaneously.
A nationwide employment crisis is declared when three or more of the five indicators exceed their predetermined risk thresholds for two consecutive months. The two-month requirement is intended to filter out temporary statistical fluctuations caused by factors such as holiday effects or base effects, and to confirm that labor market deterioration has persisted for a sustained period.
When researchers applied the criteria to past crises, the system successfully identified the core crisis periods of January through September 2009 during the global financial crisis, and June 2020 through February 2021 during the COVID-19 pandemic.
Even during the 2003 credit card crisis, when employment insurance data were not yet sufficiently accumulated, the system detected the crisis using only changes in the employment and unemployment rates. Researchers said the framework identified all three major national employment crises that have occurred since the 2000s.
Nationwide crisis triggers review process before support expansion — distinct from regional and sector-specific responses
With formal criteria now in place for declaring a nationwide employment crisis, the government's use of job retention subsidies is expected to become more systematic.
Previously, when an employment crisis emerged, the government primarily responded by designating specific regions as preemptive employment crisis response areas or classifying certain industries as special employment support sectors. For nationwide employment shocks, there were no explicit trigger conditions, forcing the government to improvise temporary measures or rely on the discretion of the minister of employment and labor and deliberations by the Employment Policy Deliberation Council.
The absence of special support conditions for a nationwide employment crisis was highlighted as a shortcoming even during the COVID-19 pandemic, when the government had to devise ad hoc responses as the situation evolved.
In response, the Ministry of Employment and Labor established a legal basis for expanding job retention subsidies when employment conditions deteriorate significantly across the country. The revised Employment Insurance Act containing these provisions has been in effect since May.
The job retention subsidy program covers part of furlough or leave allowances when employers facing financial difficulties keep workers on through temporary shutdowns or leave rather than laying them off.
Employers eligible for support are those for whom workforce adjustments are unavoidable — for example, those whose revenue has fallen more than 15 percent compared with the average of the preceding six months. The standard daily support ceiling is 68,100 won ($51) per insured worker, with a maximum of 180 days per year. Whether support will be expanded in the event of a nationwide employment crisis will be determined through the relevant legal procedures and deliberation process.
The nationwide crisis detection system is already in operation following the revised law's enactment. Going forward, when key employment indicators meet the prescribed conditions, the system will automatically flag the situation, and expanded job retention subsidies can be activated after the relevant review process.
"During COVID-19, there were criticisms that we had to improvise response strategies because there were no special support conditions for a nationwide employment crisis," a Ministry of Employment and Labor official said. "We have now differentiated our approach — individual crises confined to specific industries or regions will continue to be handled through existing regional and sectoral designation mechanisms, while national-level crises will be addressed under the new criteria."
fact0514@heraldcorp.com
