South Korea Plans $3.7 Billion Extra Budget to Create Youth Jobs

(Bloomberg) -- The South Korean government has drawn up another supplementary budget and tax breaks aimed at creating as many as 220,000 positions for young people to address stubbornly high youth unemployment.

The 3.9 trillion won ($3.7 billion) extra budget, to be submitted to parliament on April 6, will be the second since President Moon Jae-in took office last year with a vow to create jobs and increase wages. This time, the spending would be directed primarily at youth unemployment, which the government sees as a developing crisis, and regional economies hit by corporate restructurings.

Of the total, 2.9 trillion won would be used to support small and mid-size companies that hire full-time employees and to subsidize the wages of new hires. The remaining 1 trillion won would go to domestic automobile and shipbuilding companies and their employees, the finance ministry said in a statement.

Unless the problem is addressed, the country may soon face a “catastrophic job crisis,” Finance Minister Kim Dong-yeon said during a briefing on Tuesday. The supplementary budget will come from surplus tax revenues and won’t require issuing new government bonds, Kim said.

The youth unemployment rate was 9.8 percent in February, the highest in eight months. Parliament approved an 11 trillion won supplementary budget last July that was aimed at creating tens of thousands of new jobs.

The new extra budget, combined with tax breaks that will also be proposed on Thursday, is expected to create about 180,000 to 220,000 new jobs and lower the youth unemployment rate to below 8 percent by 2021, the finance ministry said. The tax breaks would be offered to new hires, low-income youth, startups and companies that hire.

Moon’s party is expected to struggle to pass the budget. It took more than a month for the previous extra budget to pass. Opposition lawmakers objected to adding more public-sector jobs -- such as police, firefighters and social workers -- to address unemployment.

©2018 Bloomberg L.P.